Oct. 11–The Texas Permian Basin Petroleum Index is showing continued growth in the Permian Basin since plunging in 2016 and Petroleum Economist Karr Ingham of Amarillo said he expects that trend to continue for several years.
Ingham, who maintains the Odessa Economic Index for the Odessa Development Corporation, said the continued oil and gas growth directly impacts the local economies in the Odessa-Midland area. It contributes to growth in employment, retail, auto sales, sales tax revenue, the housing market and more.
“There’s hardly words to describe the economic growth in the Odessa metro area,” Ingham said. “I keep running out of words to describe it.
“Extraordinary” and “spectacular” were just a few.
Ingham said when the regional oil and gas economy expands or declines, the Odessa economy tends to do the same thing.
“The fact of the matter is, for better or worse whether you like it or not, the Odessa-Midland economy is going to follow the regional oil and gas economy and that’s the reason for tracking the oil and gas index separately,” he said.
Right now, Ingham said the region is two years into an expansion in the oil and gas economy. Looking at previous booms and busts, he said the expansions typically last five or six years before a rapid decline.
“Is this one going to last longer than six years or five years?” he said. “There’s too many unknowns out there (to tell).”
Ingham said he thinks it will last a fair amount longer than it already has, but looking at the cyclical nature, he isn’t sure why anyone would suggest it would last longer than five or six years due to outside factors that could affect it.
An example he gave was the contraction following the 2002 to 2008 expansion, which was due to national and global recessions that “cratered” crude oil prices, as well as natural gas prices. But even with cyclical interruptions like price decline, he said it will still continue to be a growing industry for years and years to come.
“Will we have a 10-year uninterrupted (expansion)? Probably not,” he said. “It’s been a long time since anything like that happened. Do I feel genuinely optimistic as far as the future we can see? Yes, I do.”
The Permian Basin is currently experiencing its fifth cycle in the making. The index’s most recent decline shows it bottomed out in Sept. 2016 and Ingham said Sept. 2018 will be the milestone that shows the expansion in the oil and gas industry in the Basin.
“The index is still growing,” he said, adding that it is of note that the index hasn’t made its way back to its peak in Nov. 2014.
The number of drilling permits is not as high, prices aren’t as high and the rig count isn’t as high this time around, but Ingham said the industry is much more technologically advanced than even 10 or 15 years ago. More crude oil can be produced with fewer rigs and the amount being produced in the Basin is “still climbing at an extraordinary rate,” he said.
As a result of the relatively new technology, Ingham said a new industry has sprouted up to support the oil and gas industry and the rate of its expansion — sand mining.
While there is a rapid growth of production of oil and gas, there is also issues with the takeaway capacity since there is only so much that can be taken away from the oil field and into the marketplace, wherever that may be, he said. That issue is pushing down prices locally and since the beginning of the year about $10 billion has been lost that is not going into the region.
“The economy would be even better because they’d be receiving more,” Ingham said, adding that they are in the process of addressing the problem but it’s likely changes might not start occurring until the second half of 2019.
Ingham also created and maintains the Midland-Odessa Regional Economic Index and Midland Economic Index for the Midland Development Corporation. The Texas Permian Basin Petroleum Index, which is owned by The Texas Alliance of Energy Producers, is a part of the economic analysis system for the Permian Basin region and the Midland and Odessa areas.
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