‘Perfect storm’ created oil price drop

The head of the Louisiana Oil and Gas Association said getting the economy up and running sooner than later will be better on the state, national and global levels.

“Until we get the (oil) demand moving, the tougher it will be for industry in the short term,” Gifford Briggs, LOGA president, said during a webinar on Monday.

Briggs spoke of the need to restore the public’s faith in traveling without fear of getting COVID-19. He said COVID-19 is destroying the global demand for oil, coupled with the oil price war between Saudi Arabia and Russia, created “the perfect storm” that saw oil prices dip to historically low levels. The price of oil futures dropped sharply into the negative last week because purchasers couldn’t buy oil from producers because of a lack of storage.

Briggs said the oil surplus will continue in May, with oil futures predicted to again dip below the zero threshold.

Briggs said natural gas is feeling the same pressure, with prices dropping roughly 40 to 50 percent since last November.

“It may not have the same storage constraints, but it’s the same destruction of price values of the product,” he said.

Briggs said the next four months could lead to major layoffs in the industry, along with shutting down up to 70 percent of the more than 33,000 wells producing oil in Louisiana.

“The general economic impact is significant,” he said.

Briggs said the state should suspend severance taxes and address coastal lawsuits. On the federal level, he called for increased access to the Strategic Petroleum Reserve, reducing royalty rates in the Gulf of Mexico and expediting regulatory relief.

Stephen Waguespack, president and CEO of the Louisiana Association of Business and Industry, said many hotels survive on rooms being booked by oil and gas workers.

Waguespack said it’s time to “trust free enterprise” by opening more businesses and letting them figure out the best approach to operate and keep customers and employees safe. He added that essential businesses like grocery and hardware stores have already taken steps to protect the public while staying open.

“We have to start opening them back up and safely,” Waguespack said.

Waguespack later said in a statement that the association was disappointed in Gov. John Bel Edwards extending the stay-at-home order to May 15.

Waguespack said Louisiana restaurants need more flexibility to follow the guidelines associated with the Paycheck Protection Program federal loan. He said restaurants that have received the loan have trouble rehiring workers because they are earning more money collecting unemployment.

Waguespack called on state legislators to review the tax code over the next month as a way to fix the economy. He also called on getting rid of oil and gas lawsuits, saying predatory loans have chased away jobs in the state.Oil Prices Graphic