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Jeddah - Yasmine El Tohamy - 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 US, which pumps more crude than any other country. In the first quarter, the price of US crude fell harder than at any point in history, plunging 66 percent to around $20 a barrel.
A generation ago, a drop in oil prices would have largely been celebrated in the US, 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.
On Friday, President Donald Trump met with oil executives but there were no announcements, and prices remain well below what most US 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 percent 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 percent and end their health insurance benefits.
The impact is far-reaching. In Alaska, lawmakers recently passed a budget that sharply draws down a savings account that had been built up over the years when oil prices were higher. In New Mexico, where a third of the state’s revenue comes from petroleum, the governor slashed infrastructure spending and will likely cut more in a special legislative session.
In Texas, which produces about 40 percent of the country’s oil and employs more than 361,000 people, the picture is especially bleak. Three weeks ago, Bobby Whitacre, vice president of Impala Transport in Plano, Texas, was looking to hire a well site supervisor for $200 a day with paid time off. Now he’s had to lay off many of his workers.
“It’s dead. It’s dead as can be,” he said.
While many industries paralyzed by the coronavirus pandemic received help from a recent $2 trillion congressional relief package, the energy sector was largely left out. The American Petroleum Institute, the oil industry’s main lobbying group, has maintained its free market philosophy, saying it does not want direct financial assistance from government. But the group did ask the federal government to relax environmental rules.
Some smaller producers would welcome financial relief.
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