the oil market: from boom to gloom · 2016. 7. 13. · federal reserve bank of dallas shale boosts...

Federal Reserve Bank of Dallas

From Boom to Gloom: Energy States After the Oil Bust

Mine YücelSenior Vice President and

Director of ResearchFederal Reserve Bank of Dallas

July 12, 2016

Federal Reserve Bank of Dallas*Natural gas price is multiplied by ten. Oil is priced in $/barrel, while natural gas is priced in $/million British thermal units. Last data points are for the week ending June 24, 2016.SOURCES: Energy Information Administration; Wall Street Journal

0

20

40

60

80

100

120

140

160

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Nominal price, weekly

Oil price

$48.71

Natural gas price*$2.72

Oil and gas prices move up


Shale boosts U.S. oil production

SOURCE: Energy Information Administration.

0

2

4

6

8

10

12

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Million barrels per day 2016 average as of April:

9.11 mb/d


Rig count plunges, oil production drops

300

500

700

900

1,100

1,300

1,500

1,700

6.9

7.4

7.9

8.4

8.9

9.4

9.9

Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16

Million barrels per day Rig count

U.S. crude oil production

U.S. oil rig count

8.62 mb/d(Jun 24)

SOURCES: Baker Hughes; Energy Information Administration.


0500

1,0001,5002,0002,5003,0003,5004,000

Jan2010

Mar2015

Apr2016

Jan2010

Dec2014

Apr2016

Jan2010

Mar2015

Apr2016

Thousand barrels per day

North Dakota

Texas

1,098

3,644

1,227

236

786

1,793

UtahColoradoWyomingNew MexicoOklahoma

MontanaKansas

1,613

1,040

3,230

U.S. Shale Oil Production

SOURCE: Energy Information Administration.


IMPACT ON U.S. ECONOMY


Oil investment and rig count plunge

SOURCES: Baker Hughes; Bureau of Economic Analysis.

4006008001,0001,2001,4001,6001,8002,0002,200

020406080

100120140160

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Billions of chained 2009 $Rig count

Investment in mining/exploration

U.S. rig count OPEC decision


1.91.5

0.20.6

-0.4

0.0

2.2

-2

-1

0

1

2

3

4

Final demand Personalconsumption

Residentialinvestment

Business fixedinvestment

Government Net exports

2012:Q4 - 2014:Q2

2014:Q3 - 2016:Q1

Contribution to real growth,percentage points, SAAR Components of final demand

NOTE: Components do not sum exactly to final demand due to rounding.SOURCE: Bureau of Economic Analysis

Low oil prices boosted growth in final demand


1.91.5

0.20.6

-0.4

0.0

2.21.9

0.3

-2

-1

0

1

2

3

4





2012:Q4 - 2014:Q2

2014:Q3 - 2016:Q1



Households benefit from low energy prices and a strong dollar


1.91.5

0.20.6

-0.4

0.0

2.21.9

0.3 0.2

-2

-1

0

1

2

3

4





2012:Q4 - 2014:Q2

2014:Q3 - 2016:Q1



Mining and manufacturing firms have scaled back cap ex plans, and investment growth has slowed


1.91.5

0.20.6

-0.4

0.0

2.21.9

0.3 0.2 0.2

-0.4

-2

-1

0

1

2

3

4





2012:Q4 - 2014:Q2

2014:Q3 - 2016:Q1



Government purchases and the strong dollar have also affected final demand


IMPACT ON STATE ECONOMIES


Low oil prices benefit most states(Effect of a 50% decline in oil prices on employment)

SOURCE: “The Shale Gas and Tight Oil Boom: U.S. States’ Economic Gains and Vulnerabilities,” by Stephen P A Brown and Mine K Yücel Council on Foreign Relations Energy Brief Oct 2013

-2.0

-4.3

-2.3-0.7

-1.2 -1.6-1.7

-0.7


Energy states did well in 2014

SOURCE: Bureau of Labor Statistics.

00.5

11.5

22.5

33.5

44.5

NV

ND CO TX FL GA OR UT

WA CA SC DE MA TN ID NC

U.S

.AR AZ RI LA O

K MI

NY

OH KY WY

WI

NM IN IL

MO

MD AL PA MN SD KS CT NJ

NH IA NE

MS

VA ME

MT HI VT AK WV

Texas

U.S.

Percent Change (Dec/Dec)


Energy states lose jobs in 2015

SOURCE: Bureau of Labor Statistics

-6-5-4-3-2-1012345

ID UT FL OR AZ CA TN CO GA SC WA VA DE NV AR HI NJ

NC

U.S

.KY M

IIN MD

NH NE

MN TX OH

MS

NY

MT IA MA RI SD WI

AL VT ILM

O PA CT ME

NM KS AK OK LA WV

WY

ND

TexasU.S.

Percent Change (Dec/Dec)


Oil and gas shares falling in Texas

SOURCES: Bureau of Economic Analysis; Bureau of Labor Statistics; calculations by FRB Dallas.

0

2

4

6

8

10

12

14

16

0.00.51.01.52.02.53.03.54.04.55.0

1974 1980 1986 1992 1998 2004 2010

Mining Share of Texas

Employment

Mining Share of Texas GDP

Percent Percent

2.1%

8.8%


Is the fall in rig counts over?

NOTE: Last data point is June 24.SOURCE: Baker Hughes.

0

200

400

600

800

1,000

1,200

0

40

80

120

160

200

240

2012 2013 2014 2015

Oklahoma

TexasLouisiana

North Dakota

Rig count, weeklyRig count, weekly


Unemployment rates rising

0123456789

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

AlaskaLouisianaWyomingTexasNorth Dakota

Percent, SA

SOURCE: Bureau of Labor Statistics.

Federal Reserve Bank of DallasSOURCE: Bureau of Labor Statistics.

Initial jobless claims still high

20

40

60

80

100

120

140

160

180

2013 2014 2015 2016

Index, Jan. 5 ‘13 = 100, 4 WMA

U.S.

North Dakota

TexasLouisiana

Oklahoma


Some states rely heavily on oil and gas severance taxes

(Share of 2014 state tax revenues)

SOURCE: U.S. Census Bureau, 2014 Annual Survey of State Government Tax Collections.

72.4

53.8

39.0

18.510.9 8.9 7.5

2.1 0.00

20

40

60

80

AK ND WY NM TX LA OK CO CA

% Taxes Collected

Percent


Texas rig count ticks up but oil productioncontinues to decline

1.0

1.5

2.0

2.5

3.0

3.5

4.0

100200300400500600700800900

1,000

2013 2014 2015 2016

Rig count Million barrels per day

Texas rig countTexas oil production

SOURCES: Baker Hughes; Energy Information Administration.


Breakeven prices for existing wells from Dallas Fed Energy Survey

SOURCE: Federal Reserve Bank of Dallas.


Breakeven prices for new wells from Dallas Fed Energy Survey

SOURCE: Federal Reserve Bank of Dallas.


Texas and Louisiana Gulf Coast biggest share of U.S. refining capacity

51.5

21.516.3

7.13.6

0

10

20

30

40

50

60 Tx/La Gulf Coast Ind/Ill/KyWest Coast East CoastWy/Co

Percent

NOTE: West Coast is DOE definition of PAD 5, Ind/Ill/Ky is PAD 2, and the East Coast is PAD 1; Inland Texas has another 4 percent of US capacity; Operable distillation capacity per calendar day; January 1, 2015.


Petrochemical cost advantage remains

Note: Data are cash margins for ethylene production.Source: Muse, Stancil & Co.

-40-30-20-10

010203040506070

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Cents per pound

Gas feedstockOil-derived feedstock


Outlook• Plunge in oil prices slowed growth in energy states.

– Small energy states still in recession.– Texas - larger and more diversified - skirted recession.

• Risks:– Energy prices– Strong dollar– National economy

• Healthy national economic growth has been a tailwind

• Rough patch for energy-producing states.


From Boom to Gloom: Energy States After the Oil Bust

Mine YücelSenior Vice President and

Director of Research


the oil market: from boom to gloom · 2016. 7. 13. · federal reserve bank of dallas shale boosts...

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