TAEP: TPI sinks again as employment in Texas contracts

The Texas Petro Index was down again in September, with all indicators except crude oil and natural gas production volumes showing year-over-year declines (OGJ Online, Oct. 1, 2015).

A composite index based upon a comprehensive group of upstream economic indicators released by the Texas Alliance of Energy Producers (TAEP), the TPI in September was 226.2, down 27.4% compared with September 2014 and down 27.7% compared with the record 313 of October 2014.

Crude production in Texas totaled nearly 104.9 million bbl, up 10.5% year-over-year. With crude oil prices averaging $45.50/bbl, the value of Texas-produced crude totaled about $4.77 billion, down 43.9% from September 2014.

Estimated Texas natural gas output was nearly 728 bcf, 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.

According to statistical methods based upon Texas Workforce Commission's Current Employment Statistics estimates, the number of Texans on oil and gas industry payrolls averaged 279,600, down 7.4% from September 2014 and down 8.3% compared with the peak 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.

Underselling job losses?

But Karr Ingham, economist and creator of TPI, cautions that actual job losses in the state's upstream oil and gas industry could far exceed the estimate he develops each month for the TPI if a different Texas Workforce Commission 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, 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. That was about 47,800 fewer jobs than the 306,000 jobs indicated by the QCEW at the end of fourth-quarter 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 6 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 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 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," he said. "So the contraction is actually worse than the Texas Petro Index presently indicates as well."

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