Oil Prices Plummet to 18% Lower Than Last Year, Threatening U.S. Oil Industry Growth

Strategic Insights -

Crude oil prices have fallen to their lowest levels of the year, settling at under $59 a barrel as global supply outpaces demand. This sharp decline is attributed to the decision by Israel and Hamas to cease fire, alleviating concerns about Middle East conflicts disrupting oil flows. The recent drop has been further exacerbated by heightened trade tensions, which have weighed on expectations for economic growth and, consequently, fuel demand.

Key Takeaways:

  • The price of oil has dropped to under $59 a barrel, an 18% decrease from the end of last year, making it less expensive for Americans to fuel their cars but straining U.S. oil companies.
  • U.S. oil production is likely to level off or decline if oil prices remain around current levels, executives said, citing the sharp drop in activity levels.
  • At least 13 percent fewer oil rigs are drilling in the United States compared to last year, according to Baker Hughes, an oil field service company.
  • Oil company profits have begun to fall from recent high levels due to lower prices, adding pressure on executives to cut spending and jobs.
  • Employment in oil and gas production and related services was down 3 percent this year through July, according to the Bureau of Labor Statistics.
  • Higher prices for natural gas have helped blunt the negative economic effects of lower crude prices, but more layoffs and spending cuts are likely if prices remain below $60 through the end of the year.
  • A big challenge for the industry is that oil prices have been falling at the same time that higher tariffs have made key materials used by the industry, such as steel pipe, more expensive.

Statistics:

  • U.S. oil prices have dropped to under $59 a barrel, an 18% decrease from the end of last year.
  • U.S. oil production has climbed to a record 13.6 million barrels a day in July, but is likely to level off or decline if oil prices remain around current levels.
  • There are 13 percent fewer oil rigs drilling in the United States compared to last year, according to Baker Hughes.
  • Oil company profits have fallen from recent high levels, with Chevron, ConocoPhillips, and other companies announcing deep job cuts.
  • Employment in oil and gas production and related services was down 3 percent this year through July, according to the Bureau of Labor Statistics.
  • The cost of steel pipe used by the industry has risen by 17 percent since last year, making key materials more expensive.

Sources:

  • "Byline: Rebecca F. Elliott, Bloomberg"
  • Bloomberg (no date)
  • "Baker Hughes"
  • Baker Hughes (no date)
  • "Bureau of Labor Statistics"
  • Bureau of Labor Statistics (no date)
  • "Energy Information Administration"
  • Energy Information Administration (no date)
  • "J.P. Morgan analysts"
  • J.P. Morgan (no date)
  • "Liberty Energy"
  • Liberty Energy (no date)
  • "Moody's Analytics"
  • Moody's Analytics (no date)