Oklahoma lags energy peers in recovery
Oklahoma’s oil and natural gas industry continues its steady recovery, but uncertainty still lies ahead.
Economist Dr. Russell Evans who compiles the Oklahoma Energy Index (OEI) said Oklahoma is lagging its peer energy states in recovery. Compared against the fall 2018 peak, Oklahoma rig counts were down 70% through the close of 2021. In contrast, New Mexico was only off its 2018 peak by 22%, Texas by 50%, and North Dakota by 56%.
Oklahoma’s oil fields are similarly lagging in production. New Mexico has recovered its pre-pandemic production level, and production was growing to end the year in North Dakota. Oklahoma is not yet experiencing a similar turn in production.
“Oklahoma was the first state to see an exodus of drilling capital before the onset of the pandemic, and it may be among the last to see a return of significant drilling budgets,” said Evans, director of the Steven C. Agee Economic Research and Policy Institute. “Current rig counts are at a level that once signaled a major oilfield contraction but may now be a signal of a new normal.”
Oklahoma’s slower recovery has kept the Energy Index relatively unchanged, with data showing the most recent Oklahoma Energy Index just 0.1% higher for the month. The Energy Index now stands at 107.8.
Evans said Oklahoma’s energy industry enters 2022 with a mixed outlook. Oil and natural gas prices enjoy support both from global demand and a limited supply capacity to immediately meet it. At the same time, the global economy is slowing and faces the real possibility of policy induced weakness in an effort to control inflation. Strong economic activity is expected to sustain the industry’s recovery to start 2022 with much uncertainty in the second half of the year.
“The year ahead should reveal an interesting new balance between the industry, the economy, and economic policy as a new stage in the state’s oil and natural gas history settles in,” Evans said.
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 the Steven C. Agee Economic Research and Policy Institute.