South Louisiana beginning to feel drop in oil prices

The price of oil has fallen over the last year by 50 percent and many are scratching their heads trying to figure out why.

Last year at this time, oil was just under $100 a barrel. In November, it dropped to $75 a barrel. Today, it is just under $50 a barrel with no signs of it climbing.

Ben Broussard of the Louisiana Oil and Gas Association (LOGA) spoke at the Vermilion Chamber of Commerce luncheon and tried to explain what happened to the price of oil.

He could not pin point one direct reason for the drop. He did, however, give different theories as to what energy experts are saying what the reasons are.

“Is it supply and demand?” Broussard said. “Do we have too much and not enough demand?”

• Another possibility could be foreign countries have “stagnant” growth in their economy such as Japan.

•  Also, the U.S. dollar is strong, which may result in the  price of oil dropping, he said.

• The discovery of gas in north Louisiana and other parts of the United States may have contributed.

•  World politics could also be a contributing factor.

• The speculators on Wall Street may have a hand in it, he added. 

 Bottom line, no one is 100 percent sure why the price of oil has fallen and will it ever climb back to $100.

“We don’t know,” Broussard said. 

He said the break-even mark for companies to drill is $65 a barrel. He expects oil to climb above $50 a barrel, but he is not sure when and how high it will climb.

One thing people in South Louisiana do know is that the cheap price of oil has affected the economy in Acadiana. 

Drilling for oil has almost come to a stop in south Louisiana because drilling companies are having a hard time making a profit when oil is selling for $50 a barrel.  They have taken the “wait and see” approach. Some have  laid off workers due to the slow down in business.

• Companies have shut down production wells that are producing only 10 barrels of oil a day due to the expense. 

• Nationally, there are 1,019  rigs drilling for oil and 289 drilling for gas as of this week.  Three years ago there were a combined 1,949 rigs drilling. 

•  Nationally,  there are 56 less rigs drilling this week than there were last week. 

• In the next month, there is expected to be a record -low  800 to 900 rigs drilling nationally for oil and gas. 

• In Louisiana, there are 75 rigs drilling, which is the lowest in more than 10 years. 

• Off shore drilling in the Gulf of Mexico is down 17 rigs  this year compared to last year. There were 51 rigs drilling offshore in 2014. Today, there are only 34.  In 2001, there were 108 rigs drilling. 

 • Deep water drilling off Louisiana coast has 34 rigs. In 2014 there were 51. In 2005 there were 75 and at its peak in 2001, there were 108 rigs. 

• In-land rigs is down to only two in South Louisiana.  In 2013, there were 20 and in 2014 there were 13 rigs. It peaked at 26 in 2007.

• There are 11 land rigs drilling in South Louisiana, which is down five from last year.  In 2006 there was a record high 39 rigs. 

• Vermilion Parish has two drilling rigs. 

• North Louisiana is doing better than South Louisiana.  Today there are 28 rigs drilling.  In 2010 there was an amazing 128 rigs drilling for gas on the Haynesville Shale, located in the western part of north Louisiana.

“The industry is facing tough times,” he said. “As anyone who was in this business in the 1970s and 1980s,  they  have seen it before. We have a resilient industry. Some of the wise folks  who have been through this know it comes and goes.”

He said companies are bracing for the long-haul by watching their spending habits and cutting back, even if it means laying off part of their workforce. 

 “I have told you how it is. I am not trying to be a pessimist but an optimist,” he said.