Oil

The pandemic is battering oil-state economies

COVID-19 reverberates across the energy world.

 

Long before New Mexico or Wyoming identified any cases of COVID-19, even before residents began hoarding eggs and sacks of flour, state budgets were feeling the impact of the disease.

In mid-January, when the epidemic was still mostly confined to China, officials there put huge cities on lockdown in order to stem the spread. Hundreds of flights into and out of the nation were canceled, and urban streets stood empty of cars. China’s burgeoning thirst for oil diminished, sending global crude prices into a downward spiral.

And when oil prices fall, it hurts states like New Mexico, which relies on oil and gas royalties and taxes for more than one-third of its general fund. “An unexpected drop in oil prices would send the state’s energy revenues into a tailspin,” New Mexico’s Legislative Finance Committee warned last August. Even the committee’s worst-case scenario, however, didn’t look this bad.

Now, with COVID-19 spanning the globe, every sector of the economy is feeling the pain — with the exception, perhaps, of toilet paper manufacturers and bean farmers. But energy-dependent states and communities will be among the hardest hit.

At the end of December, the U.S. benchmark price for a barrel of oil was $62. By mid-March, as folks worldwide stopped flying and driving, it had dipped to around $20, before falling into negative territory, and then leveling off around $10 in April. The drilling rigs — and the abundant jobs that once came with them — are disappearing; major oil companies are announcing deep cuts in drilling and capital expenditures for the rest of the year, and smaller, debt-saddled companies will be driven into the ground.

COVID-19 and related shocks to the economy are reverberating through the energy world in other ways. Shelter-in-place orders and the rise in people working from home have changed the way Americans consume electricity: Demand decreased nationwide by 10% in March. As airlines ground flights, demand for jet fuel wanes. And people just aren’t driving that much, despite falling gasoline prices, now that they have orders to stay home and few places to go to, anyway.

The slowdown will bring a few temporary benefits: The reduction in drilling will give landscapes and wildlife a rest and result in lower methane emissions. In Los Angeles, the ebb in traffic has already brought significantly cleaner air. And the continued decline in burning coal for electricity has reduced emissions of greenhouse gases and other pollutants.

But the long-term environmental implications may not be so rosy. In the wake of recession, governments typically try to jumpstart the economy with stimulus packages to corporations, economic incentives for oil companies, and regulatory rollbacks to spur consumption and production. The low interest rates and other fiscal policies that followed the last global financial crisis helped drive the energy boom of the decade that followed. And the Trump administration has not held back in its giveaways to industry. The Environmental Protection Agency is already using the outbreak as an excuse to ease environmental regulations and enforcement, and even with all the nation’s restrictions, the Interior Department continues to issue new oil and gas leases at rock-bottom prices.

The impacts on energy state coffers will unfold over the coming weeks and months. But the shock to working folk from every economic sector has come swiftly. During the third week of March, more than 3 million Americans filed for unemployment — more than 10 times the claims from a year prior.

A view of the interchange of Highway 60 and Interstate 710 during the coronavirus pandemic on April 11, 2020 in Los Angeles, California. The county’s stay-at-home order has drastically decreased the traffic flow in and around Los Angeles.

Infographic design by Luna Anna Archey. Sources: U.S. Energy Information Administration, New Mexico Legislative Finance Committee, U.S. Bureau of Labor Statistics, California Independent System Operator, Baker-Hughes, Unacast, FlightRadar24, Wyoming Department of Revenue, Carbon Footprint, International Air Transport Association, OAG.

Jonathan Thompson is a contributing editor at High Country News. He is the author of River of Lost Souls: The Science, Politics and Greed Behind the Gold King Mine Disaster. Email him at [email protected] or submit a letter to the editor. 

High Country News Classifieds
  • CARDIGAN WELSH CORGIS
    10 adorable, healthy puppies for sale. 4 males and 6 females. DM and PRA clear. Excellent pedigree from champion lineage. One Red Brindle male. The...
  • A CHILDREN'S BOOK FOR THE CLIMATE CRISIS!!
    "Goodnight Fossil Fuels!" is a an engaging, beautiful, factual and somewhat silly picture book by a climate scientist and a climate artist, both based in...
  • DIGITAL ADVOCACY & MEMBERSHIP MANAGER
    The Digital Advocacy & Membership Manager will be responsible for creating and delivering compelling, engaging digital content to Guardians members, email activists, and social media...
  • DIGITAL OUTREACH COORDINATOR, ARIZONA
    Job Title: Digital Outreach Coordinator, Arizona Position Location: Phoenix or Tucson, AZ Status: Salaried Job ID Number: 52198 We are looking for you! We are...
  • DESCHUTES LAND TRUST VOLUNTEER PROGRAM MANAGER
    The Deschutes Land Trust is seeking an experienced Volunteer Program Manager to join its dedicated team! Deschutes Land Trust conserves and cares for the lands...
  • ASSOCIATE DIRECTOR OF DEVELOPMENT
    The Nature Conservancy in Wyoming seeks an experienced fundraiser to join our team. We're looking for a great communicator who is passionate about conservation and...
  • INDIAN COUNTRY FELLOWSHIP
    Western Leaders Network is accepting applications for its paid, part-time, 6-month fellowship. Mentorship, training, and engaging tribal leaders in advancing conservation initiatives and climate policy....
  • MULESHOE RANCH PRESERVE MANAGER
    The Muleshoe Ranch Preserve Manager develops, manages, and advances conservation programs, plans and methods for large-scale geographic areas. The Muleshoe Ranch Cooperative Management Area (MRCMA)...
  • ARTEMIS PROGRAM MANAGER
    Founded in 1936, the National Wildlife Federation (NWF or Federation) is America's largest and most trusted grassroots conservation organization with 52 state/territorial affiliates and more...
  • ASSISTANT OR ASSOCIATE PROFESSOR OF ENVIRONMENTAL HUMANITIES
    Assistant or Associate Professor of Environmental Humanities Whitman College The Environmental Humanities Program at Whitman College seeks candidates for a tenure-track position beginning August 2023...
  • ANNUAL FUND MANAGER
    Working closely with the Foundation's leadership, the Annual Fund Manager is responsible for the oversight and management of the Foundation's annual operating fund. This is...
  • DATABASE ADMINISTRATOR
    Looking for someone who loves public land and understands the value and importance of data in reaching shared goals as part of a high-functioning team....
  • EXECUTIVE DIRECTOR
    High Country Conservation Advocates (HCCA) in Crested Butte, CO is seeking an enthusiastic Executive Director who is passionate about the public lands, natural waters and...
  • ASSOCIATE DIRECTOR OF VOLUNTEER PROGRAMS
    Are you passionate about connecting people to the outdoors? The Pacific Crest Trail Association (PCTA) is looking for someone with volunteer management experience to join...
  • EXECUTIVE DIRECTOR
    The conservation non-profit Invasive Species Action Network seeks an executive director. We are focused on preventing the human-caused spread of invasive species by promoting voluntary...
  • NEW BOOK: A FEAST OF ECSTATIC VERSE AND IMAGERY
    Dynamic fine art photographer offers use of images to raise funds. Available for use by conservation groups. Contact at www.anecstaticgathering.com.
  • WANTED: TALENTED WRITER
    Write the introduction to A Feast of Ecstatic Verse and Imagery, a book concerning nature and spirituality. Contact at www.anecstaticgathering.com. Writer who works for conservation/nature...
  • MT STATE DIRECTOR- THE WILDERNESS SOCIETY
    The Montana State Director is a member of The Wilderness Society's (TWS) Conservation program team who plays a leading role in advancing the organization's mission...
  • HIGH COUNTRY NEWS EDITORIAL INTERNS
    High Country News, an award-winning magazine covering the communities and environment of the Western United States, is looking for its next cohort of editorial interns....
  • THE MAGICAL UNIVERSE OF THE ANCIENTS: A DESERT JOURNAL
    Bears Ears, Chaco Canyon, and other adventures in the Four Corners area. 60 photos and lively journals. Purchase hc $35 or pb $25 from bigwoodbooks.com...