Oil price collapse could prove devastating to Oklahoma
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This week saw the worst crash in the oil market in history, with prices falling into the negative for the first time ever. Since the early days of the oil boom, Oklahoma’s economy has been linked to the oil industry, and this is still true today.
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The long-term ramifications of this week’s collapse, even assuming a partial recovery in the weeks ahead, could prove devastating to the finances of a state already suffering huge revenue losses due the ongoing coronavirus pandemic.
The leader of one oil industry association described the events of April 20 as “a nightmare,” and within 24 hours massive new layoffs were announced in Oklahoma and Texas, which are among those states most dependent on oil revenue to fund public schools and a variety of government services.
The Houston Chronicle reported Tuesday that 6,400 jobs were shed in Texas and Oklahoma in a single day. Hundreds of smaller oil companies are already poised to file for bankruptcy, a number that is likely to grow dramatically.
The collapse had been brewing even before COVID19 became a pandemic, largely due to overproduction by Russia and Saudi Arabia, both of which finally agreed to cut production, but the move, coupled with a lack of air and car travel after the new coronavirus struck the United States, proved to be too late.
In an interview with Public Radio Tulsa (KWGS), former Tulsa mayor and current oil executive Dewey Bartlett, Jr., said the impact of the job losses and subsequent decline in sales tax revenue will hit municipalities especially hard, because job losses mean less people, and less companies, buying things that generate sales tax.
“Every municipality in Oklahoma, their only source of tax revenue they can look to is that from sales taxes,” Bartlett told KWGS. “Period. If retail sales are dropping, the amounts of money that cities are going to receive will be dropping.”
This means cuts in services and perhaps even layoffs by city governments, including to public safety employees such as police officers and fire fighters.
Schools throughout the state, already among the least adequately funded in the nation, are expected to suffer even more as state coffers dwindle. It is estimated that up to a quarter of all jobs in Oklahoma are directly or indirectly tied to the energy sector. (La Semana)