Decrease in gas prices could cause job losses in oil industry

Low prices means decreased gasoline production, economist says
Updated: Nov. 30, 2018 at 5:55 PM CST
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Decrease in gas prices could cause job losses in oil industry

NACOGDOCHES, TX (KTRE) - According to the American Automobile Association, the statewide gas price average is $2.19 a gallon, the lowest it’s been this year. According to economist Dr. Rebecca Davis, this drop has been something to take note of.

“Oil and gas industry is a significant chunk of the Texas economy, and when crude oil prices dip as low as they have been dipping over the past couple of months it’s definitely something to be concerned about and something to watch,” Davis said.

Davis is an assistant professor of economics at Stephen F. Austin University who specializes in energy economics. She says that this drop in gas prices is a result of companies on the New York Stock Exchange trading future prices of crude oil.

“It’s almost like betting that in the future oil prices are gonna be “x” dollars, which means “x” amount of oil is going to be sold," Davis said. "So when future prices drop, then real crude oil prices drop.”

According to Davis the drop in prices will affect not only the oil and gas industry, but the Texas economy as well.

“The last time that this happened in 2015 and 2016, when crude oil prices were that low, Texas saw kind of a huge retraction in the employment in the oil and gas industry," Davis said. "They saw a fall of over 15 percent in that industry, which is significant.”

However, she says that this shouldn’t be a cause for panic.

“Texas economy is very resilient,” Davis said. “It’s actually a lot more diversified than it was, say 30 or 40 years ago. So even in 2015 and 2016 when the oil and gas industry saw a huge retraction in employment, because there was so much growth in these other industries, Texas saw a 1.2 - 1.3 percent growth in employment over that time."

Davis also stated the best price for crude oil price in regards to the Texas economy is between $50 to $70 a barrel. She says that since it is the holiday season, people will be traveling at much higher frequencies, increasing the demand for crude oil and putting upward pressure on crude oil prices.

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