Nowhere to labor: The US oil industry, sapped by COVID-19, has lost hundreds of rigs in a ‘historic and troubling’ year

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Nowhere to labor: The US oil industry, sapped by COVID-19, has lost hundreds of rigs in a ‘historic and troubling’ year

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Houston confronts one-two punch of virus, oil bust

AP Domestic

Labor Day is meant to be a celebration. A day to reflect on and recognize the achievements of American workers.

There’s little to celebrate this year, however, for roustabouts, roughnecks and drillers — the hard-working muscle for decades on oil rigs from the wilds of Alaska to high plains of Wyoming. These are jobs that have long helped fuel America. The ongoing coronavirus pandemic has brought it all to a hard stop in many places.

How bad is it?

Texas, the largest oil-producing state in the U.S., had 440 land rigs at the end of August last year, according to Baker Hughes’ weekly count. That number had shrunk to 104 this year. 

The story was the same in North Dakota, the second-largest oil-producing state: The rig count was down from 51 to 10, according to Baker Hughes.

And, in Wyoming, where the oil and gas industry is the state’s economic backbone, the rig count dropped to zero for one week in July for the first time since 1884, Pete Obermueller, executive director of the Petroleum Association of Wyoming Executive Director, told USA TODAY.

“It’s historic and troubling,” because there are many jobs associated with oil rigs, Obermueller said.

In January, Wyoming had 25 rigs, according to Baker Hughes data. That number had dropped by nearly half by early April and then to zero in July as the COVID-19 pandemic gripped the country.

Each rig accounts for approximately 100 jobs, said Obermueller, meaning that roughly 2,500 jobs have been lost in The Cowboy State since the beginning of the year.

“In normal times, if a rig lays down in Wyoming, that crew might move to North Dakota, or Texas or New Mexico. But, in this particular climate, there (is) nowhere to move because everyone was down,” he said, referring to the dwindling rig count in those states. 

“So, it essentially functioned as total job loss,” Obermueller said.

New Mexico had 46 rigs at the end of August, down from 108 a year ago, according to Baker Hughes. Neighboring Utah has been without an active rig since the beginning of May.

Utah and Idaho are among the states with the best economies. Where do other states fall?

The national rig count, according to Baker Hughes data, has fallen nearly 30% since the end of August 2019, from 876 to 241, and COVID-19 will likely prevent a quick recovery. Demand is down: The per-barrel price for October delivery is $42.61, compared to about $58 at this time a year ago.

The loss of every oil job is amplified in Wyoming, where the oil and gas industry paid for 40% of all property taxes in 2019, according to the petroleum association. It also contributed $705 million to public education and millions more to the state fund and cities, towns and counties.

Obermueller also estimates the Cowboy State is facing an approximately $2 billion shortfall in state funds with the oil and gas industry plummeting. According to the Petroleum Association of Wyoming, the oil and gas industry paid for 40% of all property taxes in the state in 2019.

“That’s an insurmountable gap,” said Obermueller, who estimates the state is facing an approximately $2 billion shortfall with the oil and gas industry slumping in 2020.

“You can’t cut your way out of it and our population is too small to necessarily tax your way out of it, either, so it’s intractable and really, really relies heavily on oil and gas being able to stand back up in the state,” he added. “It has a community impact that’s deeply felt.”

With national rig count falling, oil industry leans on horizontal drilling

While the national rig count has gradually declined over the years — even before the coronavirus pandemic — oil and gas production has been increasing with the rise of horizontal drilling.

In April of last year, the country’s oil production sustained a record-tying 12.1 million barrels per day while petroleum demand was at its highest since 2007, according to the American Petroleum Institute.

That number had reached 12.8 million by the end of 2019, according to the U.S. Energy Information Administration.

In Texas, where oil and gas producers evacuated near the Gulf of Mexico before Hurricane Laura made landfall on Aug. 27, the rig count is slowly increasing. The state added up to eight rigs in August before losing one in September, according to Baker Hughes data.

Texas Oil & Gas Association President Todd Staples is taking an optimistic approach.

“Throughout the pandemic, every sector of the Texas oil and natural gas industry — exploration and production, oilfield services, transportation and storage, and refining and manufacturing — has continued to reliably provide the oil and natural gas products that have helped keep Texans safe, stocked and fueled up,” Staples told USA TODAY in a statement.

While oil workers are losing their jobs, Staples said the industry is “well equipped” to help families, businesses and communities recover during the ongoing pandemic.

The recovery in Wyoming, though, will be different and much more difficult, Obermueller said.

“There’s much talk about a V-shaped recovery in other industries, [but] a V-shaped recovery in oil and gas in Wyoming is harder. It will be more U-shaped,” he said.

Contributing: The Associated Press

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