Still, across south Louisiana in general, the picture is far from dire. Jason El Koubi, president of One Acadiana (formerly the Greater Lafayette Chamber of Commerce), says that even though south-central Louisiana is heavily populated with oil-related businesses, data such as drilling permits and rig counts are not yet showing cause for alarm. “Any job losses can cause anxiety,” he says. “But much of the service industry in Acadiana is focused on deepwater (offshore drilling and production), which is sustainable at a lower oil price.” With job losses so far concentrated mainly in onshore plays and shallow water, the negative impact of lower oil prices on the south Louisiana economy “has been muted,” El Koubi says. Companies focused on drilling and producing from deep waters of the Gulf of Mexico generally keep their eyes on long-term goals, given that it can take five to seven years or more to develop and begin extracting hydrocarbons from a deep-water field. Within that time, the spot price of oil on world markets will rise and
fall, perhaps substantially, but the companies are making calculated wagers that prices over the long-term will more than support their activity. STAY THE COURSE Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, says that while “anyone who says they know what prices are going to be next year is just guessing,” the large companies that form the bulk of his organization’s membership spend a lot of time making and revising long-term oil price forecasts. “From what I see, they believe in staying the course ... and they think that prices will rebound,” he says. John says myriad factors affect the price of oil, but neither the current glut nor softer demand in major consuming countries such as China are new situations, and now is not the time to panic. The price drop “doesn’t change the fact that we use 20 million barrels of oil a day in this country,” he says. “We’ve got to keep producing.” The downturn in the price of oil has had some Louisiana residents
EL KOUBI: “Much of the service industry in Acadiana is focused on deepwater, which is sustainable at a lower oil price.”
recalling the economic horrors of the 1980s, when oil prices took a nosedive, bankers began calling in loans and the resulting real estate crash soured the entire regional economy. But industry leaders say such pain is less likely this time around, in part because companies are leaner and operate more efficiently than they once did, lessening their risk of financial failure. In addition, it may not be long before oil prices begin to creep upward and stabilize.
TERRI FENSEL
Dismukes says that, despite the current oversupply, crude oil is unlikely to languish around $50 a barrel for an extended period. Though he says “it’s very hard to call this market,” he guesses that oil will start a slow climb toward $70 a barrel and over the course of a few years finally settle in the range of $75 to $80. As this publication went to press, West Texas Intermediate crude was trading at $50.14 (April 6), up from a one-year low of $42.60 in midMarch.
10/12 INDUSTRY REPORT • SPRING 2015
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