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Does the Pandemic Spell the End for West Texas Oil as We Know It?

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One of the largest-felt impacts that the COVID-19 pandemic has had in Texas is that of its impact on oil. The industry has suffered a crisis state, triggering money and job loss for those who depend on it for a living. A worldwide oil surplus coupled with a reduction in demand, as a result of the pandemic and government restrictions, has made things hard on a number of those in West Texas.

Amid the hundreds of thousands in line for unemployment due to coronavirus-induced closures have been those in the West Texas oil industry. Just one year ago, according to recent reports, the number of oil rigs in this state was 485. As of the last count, on May 15, 2020, that number has dropped to a staggering 150.

Does the Pandemic Spell the End for West Texas Oil as We Know It?

Photo: envato elements

Not only that, but the price of West Texas Intermediate crude oil dropped from $63.17 per barrel as of Wednesday, May 20, 2019, to $33.92 (nearly half,) on the following day. In the meantime, it has been estimated by Bloomberg that for Permian Basin oil producers to break even, the required price per barrel would be $47. The impact on this industry will be felt throughout the greater economy. Such things as public education, infrastructure, and similar public services which receive funding through tax revenue from the Permian Basin oil industry, could suffer vastly.

Does the Pandemic Spell the End for West Texas Oil as We Know It?

Photo: envato elements

Despite the fact that West Texas has seen downturns in the oil industry on prior occasions, some in the industry feel that this is too big a blow for the region to recover from. The saving grace would be for energy demand to climb as a result of global economic growth, allowing for oil demand to once again return. The current state of reopening in Texas and beyond, however, has oil industry executives feeling cautiously optimistic.