The health of Oklahoma’s oil and natural gas industry is intertwined with the health of the state’s overall economy, a fact proven once again by the Oklahoma Energy Index.
As a falling national gross domestic product fans fears of U.S. recession, Dr. Russell Evans said the impact of such an economic downturn could be mitigated locally by the strength of the state’s oil and natural gas industry. Evans, principal and founder of Regional Economic Advisers LLC, said Oklahoma’s real GDP growth is tied to growth in the oil and natural gas industry, with the state’s GDP growing by 3.7% from 2005 to 2015 thanks to a strong and growing oil and natural gas industry. From 2015 to today, the industry weathered two significant downturns, and Oklahoma’s GDP growth plateaued at just 0.4% per year in that time frame.
“Recessions are not easily defined and like Oklahoma tornados are often only fully measured in hindsight as the economic damage is revealed,” said Evans, who compiles the monthly Oklahoma Energy Index (OEI). “As the state’s defining industry, persistent and robust economic growth depends on strength in the oil and natural sector. The industry is undoubtedly gaining strength, and the state undoubtedly will need that strength in the challenging months that lie ahead.”
Oklahoma’s energy industry is holding strength in these uncertain economic times as the most recent Energy Index shows the industry expanded 2.2% for the month. The gains were led by new hires in both the primary and support sectors of the industry, additional rig activity and higher crude oil spot prices. The index is now up 34.1% from a year ago and stands at 131.5.
Petroleum Alliance President Brook A. Simmons said there is reason for optimism in Oklahoma’s oil and natural gas industry and, in turn for the state’s economy as a whole. Geopolitical events have forced a recalibration for public officials who have overlooked the role stable, affordable energy supplies play in national security. Drilling activity has returned to pre-pandemic levels and is gaining. More workers are returning to Oklahoma oilfields, and that number will increase as more rigs return to the horizon.
“We need affordable, reliable energy,” Simmons said. “Oklahoma’s crude oil and natural gas industry will provide it. Our producers are increasing both drilling budgets and production to meet those needs, and our midstream and downstream sectors are hard at work processing and moving product to where it is needed most.”
The OEI is a comprehensive measure of the state’s oil and natural gas economy established to track industry growth rates and cycles in one of the country’s most active energy-producing states. The OEI is a joint project of The Petroleum Alliance of Oklahoma and Regional Economic Advisers LLC.