Texas Petro Index: Texas Upstream Oil and Gas Industry Endures Brutal Downturn in 2nd Quarter of 2020
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June 2020 Texas Petro Index falls to 157.5, down 24% year-over-year according to the Texas Alliance of Energy Producers.
AUSTIN, Texas – June 3, 2020 – COVID-19 as a global economic event ravaged energy markets starting in March 2020, and the resulting economic lockdown and deep contraction in energy demand dealt a gut-punch to the Texas oil and gas industry which continues midway through the year. The Texas Alliance of Energy Producers’ Texas Petro Index (TPI), a cyclical measure of the health and vitality of the upstream oil and gas economy in Texas, chronicled that contraction, posting a one-month record decline in April and recording the continued fall in activity levels through June.
“Petroleum energy demand dropped off the cliff sharply and rapidly at the same time crude oil production was peaking, particularly in Texas and the U.S.,” said Karr Ingham, Petroleum Economist for the Texas Alliance of Energy Producers and the creator of the monthly statewide upstream activity index. “That would have been bad enough; throw in a market share temper tantrum between Saudi Arabia and Russia at the worst possible time, and you have a thoroughly devastating impact on energy markets.”
The TPI fell to 157.5, the lowest monthly index value since February 2017 when the industry was recovering from the downturn 2014-2016. The June Texas Petro Index is down by over 24% compared to the June 2019 TPI and is down by over 16% just since February of this year. Crude oil prices declined sharply beginning in March, along with the rig count, drilling permits, and upstream (exploration and production) direct employment. Crude oil production in Texas peaked in March 2020 and has declined at a record pace since then, falling by over 710,000 barrels per day in just three months.
“In 2015-16 as a result of the price collapse beginning in 2014, Texas daily crude oil production declined by about 13.7% over an 18-month period of time,” said Ingham. “Since March 2020, crude oil production in Texas declined by over 13% in just three months.”