Despite recent signs of a recovery in oil prices, U.S. energy companies are continuing to decline at a rapid rate.
CCTV America’s Steve Mort reported from Houston.
Many have declared bankruptcy since the start of 2015, dozens in the first few months of this year alone.
Analysts warn it could take some time for the sector to fully recover.
Johnson is one of many oil workers laid off in Houston after oil prices plunged nearly 75 percent from their peak in June 2014.
After spending eight years working at a fracking company, Johnson was laid from his drill site job in 2014. After sinking below $30 a barrel in January of this year, prices have recovered a bit, but people like Johnson are still out of work.
“Nothing on this earth makes you feel more worthless than being unemployed,” Johnson said.”Nothing.”
According to industry analysts based in Houston, the energy sector has shed more than 350,000 jobs worldwide after oil prices plunged. Around one in three Texas oil workers lost their jobs in the downturn.
Although prices have now rebounded to about $50 a barrel, bankruptcies still continue.
“When they financed their business most recently oil was close to $100 a barrel,” Jason Cohen, bankruptcy attorney at Bracewell LLP, said. “They borrowed a lot of money and it was a good time to drill wells. Now the price is cut in half and they just can’t service that debt.”
With billions of dollars in drilling projects on hold, analysts worry energy companies emerging from bankruptcy won’t be in position to boost production when the market eventually recovers.
“The oil companies who were drilling heavily on debt prior to 2014 will find it difficult to raise their debt,” Chris Ross, executive professor at the University of Houston, said. “In fact, their first job – when they start getting cash-flow positive, is to pay down the debt and strengthen their balance sheet. So there’s going to be a financial delay.”
Mixed impact from lower oil and gasoline prices for US economy
U.S. consumers are spending less at the gas pump these days, paying on average about $2.20 per gallon. The American Automobile Association said prices are at their lowest in 12 years.
CCTV America’s Roza Kazan reported.
Prices have been falling for two years now. At an average of about $2.20 a gallon, it’s a far cry from the record $4 a gallon during the 2008 recession.
About a quarter of all gas stations in the U.S. right now are selling gasoline for less than $2 a gallon. Consumers haven’t seen prices this low during the summer since 2004.
But while cheap gas is good for commuters and vacationers, the Environmental Protection Agency said, it’s bad for the planet.
The government’s Environmental Protection Agency said driving is responsible for more than 16 percent of the U.S. greenhouse gas emissions. Due to the lower gas prices, Americans have returned to driving and buying bigger cars.
The U.S. government said Americans saved $700 on gas per household last year. Economists expect that to be good news for the economy as consumers drive and spend more.
However, the U.S. shale oil boom led to tremendous production of oil and gas. But as oil prices dropped, the industry has slowed down dramatically.
“There’s been a lot of people that have been laid off, tens of thousands if not more,” Sam Ori, executive director from Energy Policy Institute at the University of Chicago, said. “And the amount of capital that the industry is investing in the U.S. economy in particular took a more than a $100 billion hit.”
Sam Ori on what low oil prices really mean
Oil prices are low, but is that really a good thing? What does it mean for wages? The environment? For consumer spending? For the economy as a whole? In an extended interview with CCTV America’s Roza Kazan, Sam Ori, Executive Director of the Energy Policy Institute at the University of Chicago gives us some straight talk about how low oil prices mean much more than just cheap gas.
Carl Larry on oil bankruptcies
For more information, CCTV America’s Michelle Makori interviewed Carl Larry, director of oil and gas for Frost & Sullivan, about oil bankruptcies.
Kent Moors discusses recent trends in oil prices
For more on oil prices, CCTV America’s Michelle Makori spoke to Kent Moors, executive chairman of Energy Capital Research Group.