TPI: Texas oil and gas job losses appear worse than thought

The Texas Petro Index (TPI) was down again in September – with all indicators except crude oil and natural gas production volumes showing year-over-year declines – falling to 226.2, nearly 28% less than in October 2014 when the TPI hit a record 313.0.

But Karr Ingham, the economist who created the TPI and updates it monthly, cautions that actual job losses in the state’s upstream oil and gas industry could far exceed the estimate that he develops each month for the TPI, if a different Texas Workforce Commission (TWC) data set is accurate.

“We use two data sets from the TWC’s Current Employment Statistics (CES) series in calculating the TPI, because it is monthly and timely and reflects the industry standard for reporting monthly employment data,” Ingham said. “The CES, when a seasonal adjustment is applied, indicates the upstream oil and gas industry lost about 30,000 jobs through September since peaking in December 2014 at 305,000.

“That's certainly significant enough, but it appears to be inaccurate when compared to the TWC’s Quarterly Census of Employment and Wages (QCEW), which measures jobs at the county level and sums up by industry.”

Evidence of steeper job cuts than indicated by the TPI can be found in the QCEW most recent estimate of upstream oil and gas employment, which totaled 258,200 as of the end of the second quarter of 2015. That was about 47,800 fewer jobs than the 306,000 jobs indicated by the QCEW at the end of the fourth quarter of 2014, which was “amazingly close to the 305,000 jobs estimated by the TPI in December,” Ingham said.

“The loss of nearly 48,000 jobs in just six months is staggering, and again, that only represents industry employment loss through the second quarter of this year,” he said.

Although the TWC has not yet reported QCEW data through the third quarter, Ingham said, “it is certain that job losses have continued.” Extrapolating from the QCEW estimate at the end of the second quarter, Ingham conservatively estimates upstream oil and gas job losses at 56,000.

“When the upstream oil and gas economy in Texas entered into the current contraction, we estimated that jobs lost over the length of the downturn could total 40,000-50,000 jobs,” Ingham said. “We now appear to be well beyond that estimate, and the end is not is sight. Ultimately, the TPI will be revised downward when CES employment data are corrected early next year. So the contraction is actually worse than the Texas Petro Index presently indicates as well.”

A composite index based upon a comprehensive group of upstream economic indicators, the Texas Petro Index in September was 226.2, 27.4% less than in September 2014. Before embarking upon the current economic downturn, the TPI peaked at a record 313.0 in October 2014. At 226.2, the TPI is down about 27.7% compared to that peak number, which marked the zenith of an economic expansion that began in December 2009, when the TPI stood at 187.7.

Among leading TPI indicators during September:

  • Estimate crude oil production in Texas totaled nearly 104.9 million barrels, about 9.9 million barrels (10.5%) more than in September 2014. With crude oil prices averaging $45.50/bbl, the value of Texas-produced crude oil totaled about $4.77 billion, 43.9% less than in September 2014.

  • Estimated Texas natural gas output was nearly 728.5 billion cubic feet, a year-over-year monthly increase of 2.6%. With natural gas prices in September averaging $2.59/Mcf, the value of Texas-produced gas decreased 31.9% to about $1.89 billion.

  • The Baker Hughes count of active drilling rigs in Texas averaged 367, compared to 902 in September 2014. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009. In the most recent economic expansion, which began in December 2009, the statewide average monthly rig count peaked at 932 in May and June 2012. The statewide rig count was at 904 as recently as the fourth week of November 2014.

  • The number of Texans on oil and gas industry payrolls averaged 279,600, according to statistical methods based upon Texas Workforce Commission “Current Employment Statistics” estimates, about 7.4% less than in September 2014, but nearly 8.3% less than the record of 305,000 Texas oil and gas employees recorded in December 2014. The nadir of upstream oil and gas industry employment in Texas before the December 2014 record was 179,200 in October 2009. During the previous growth cycle, industry employment peaked at 223,200 in November 2008. Again, though, there is substantial reason to believe these figures are overstating industry employment in 2015. 

The Texas Petro Index is a service of the Texas Alliance of Energy Producers, the nation’s largest state association of independent oil and gas producers.


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