Chaos and scrambling in the US oil patch as prices plummet
NEW YORK — In Montana, a father and son running a small oil business are cutting their salaries in half. In New Mexico, an oil truck driver who supports his family just went a week without pay. And in Alaska, lawmakers have had to dip into the state’s savings as oil revenue dries up.
The global economic crisis caused by the coronavirus pandemic has devastated the oil industry in the U.S., which pumps more crude than any other country. In the first quarter, the price of U.S. crude fell harder than at any point in history, plunging 66% to around $20 a barrel.
A generation ago, a drop in oil prices would have largely been celebrated in the U.S., translating into cheaper gas for consumers. But today, those depressed prices carry negative economic implications, particularly in states that have become dependent on oil to keep their budgets balanced and residents employed.
“It’s just a nightmare down here,” said Lee Levinson, owner of LPD Energy, an oil and gas producer in Tulsa, Oklahoma. “Should these low oil prices last for any substantial period of time, it’s going to be hard for anyone to survive.”
Crude prices recovered some ground, trading at around $28 a barrel Friday, after a week in which President Donald Trump tweeted that he expects Saudi Arabia and Russia will end an oil war and dramatically cut production.
On Friday, he met with oil executives but there were no announcements, and prices remain well below what most U.S. producers need to stay afloat.
Among the latest casualties is Whiting Petroleum, an oil producer in the Bakken shale formation with about 500 employees that filed for bankruptcy protection Wednesday. Schlumberger, one of the largest oilfield services companies, slashed its capital spending by 30% and is expecting to cut staff and pay in North America. And Halliburton, another major oilfield services provider, furloughed 3,500 of its Houston employees, ordering workers into a one-week-on, one-week-off schedule.
“You will see a tremendous loss of jobs in this industry,” said Patrick Montalban, owner of Montalban Oil and Gas, based in Montana, who along with his son is slashing his salary in half and plans to cut the his remaining employees’ salaries by 25% and end their health insurance benefits.