Economist says 2016 isn’t pretty picture for oil, outlook is bleak
TULSA — The outlook is bleak for the state economy if oil prices remain about $30 a barrel and the country enters a recession, an economist said Thursday at the 2016 Mid-Continent Digital Oilfield Conference.
“It’s not a pretty picture,” Russell Evans, executive director of Oklahoma City University’s Steven C. Agee Economic Research and Policy Institute, said in his keynote address.
Evans said that although he doesn’t expect the U.S. economy to fall into a recession, increasing chatter about the possibility of one has become too loud to ignore.
If a recession is indeed coming, Evans said the low commodity prices of 2015 put Oklahoma in a position where the state would feel the downturn’s effects right away. That would be a first for the state in the postwar era, Evans said, because Oklahoma typically enters national downturns coming off a period of high oil and gas prices.
The most recent example comes with the Great Recession — nationally the downturn started in late 2007, but Oklahoma’s economy remained resilient until the second half of 2009.
“We have no protection from robust oil and gas activity across the state,” Evans said. “If we move into the recession on the heels of $30 per barrel oil … Oklahoma would be hit immediately and mercilessly.”
Although Evans said predicting the price of crude is futile, the best signs indicate that prices will climb into the upper $30 to $40 range by the end of 2016.
Currently, expectations point to a year of flat economic and fiscal activity, Evans said. Any growth in 2017 likely will depend on the performance of the second half of the fiscal year.
The sustained population growth that Oklahoma City has seen during the past 25 years because of its prime position in the Interstate 35 corridor helps to insulate Oklahoma’s capital from the downturn in commodity prices, he said.
Tulsa has seen a little bit of that population growth but not nearly as much as Oklahoma City, he added.
Tulsa also is exposed to low commodity prices in the form of manufacturing employment — the Tulsa metro area lost 5,000 of manufacturing jobs between November 2014 and 2015, Evans said.
The biggest problems with the downturn in prices come from the rest of the state, Evans said.
“The rest of the state is really bearing the brunt of this,” Evans said. “Rural Oklahoma is completely exposed to the weakness in the industry.”
Attendance for the digital oil-field conference on Wednesday and Thursday exceeded the turnout for last year’s event, said Cory Durham, conference committee chairman.
Durham, who is with conference host Sustaining Oklahoma’s Energy Resources and who also works as a crude purchaser for Tulsa-based Pacer Energy Marketing, said the crowd of about 200 people exceeded expectations and included a noticeable number of walk-in registrations.
Durham said he thinks the cost-lowering benefits of technological advancements that the annual conference highlights drive the event’s popularity.
“I think that’s why we did have the staying power in this economy,” Durham said.