The worldwide pandemic is being felt hard in the Bayou State, which like many other states, has seen its economic engines stall.
In particular, Louisiana's oil and gas industry is suffering with no clear sign on when things will improve in the short term. On Friday, oil was hovering around $20 a barrel, an 18-year low, and on Monday the bottom fell out with oil costing less than zero. However, demand is expected to increase later in the year.
Louisiana Oil and Gas Association President Gifford Briggs told the Louisiana Record that demand dropped by as much as 10 million barrels per day in March — and that could double in April.
Compounding the problem of demand falling out due to shelter in place orders across the country, the worldwide oil market is saturated after Russia and Saudi Arabia engaged in a price battle that ended last week.
It is, Briggs and other oil company executives say, a perfectly dreadful storm.
“The challenge the industry is facing right now is by far the biggest I have seen,” he said. “These are challenges no one could have predicted.”
Briggs has been with LOGA for 13 years but his father worked in the industry and he grew up in it.
“I’ve been a part of it, one way or the other, my whole life,” he said.
While the stormy weather last weekend was a reminder that hurricane season is approaching, and the Saudia Arabia-Russian price war that just came to an end caused a worldwide glut, with the pandemic being the common denominator.
“The COVID crisis and the demand destruction it is causing makes everything look small,” Briggs said.
He said reopening the Louisiana economy, or any state’s economy, would be a positive sign.
“Anything moving in the right direction,” Briggs said.
When will things improve?
“I don’t know the answers to that question,” he said. “I don’t think the recovery will be as fast as the fall was.”
Like the hailstones that pelted the state on Sunday, bad news has hit in tremendous volume. Last month, the city of Honolulu filed a lawsuit claiming eight oil companies caused damage to the city because of climate change linked to burning fossil fuels.The lawsuit makes similar claims as others filed by state and local governments against Big Oil in other parts of the country.
Professor Pearson P. Cross of the University of Louisiana at Lafayette said the Hawaiian lawsuit is just another punch to the gut for the oil industry.
“The timing of the suits against oil companies is indeed unfortunate given the COVID-19 crisis and plunging oil prices,” Cross told the Louisiana Record. “However, given the disruption of oil production already produced by low prices and over-supply, the lawsuits are unlikely to make much difference for the industry or for Hawaiian tourism.”
He said with oil prices in an 18-year slump, such legal trouble only adds to their miseries.
“Every additional burden will make it harder for oil companies to bounce back. However, it is not possible to see an end to the importance of fossil fuels for economic activity, travel and growth in the next century,” Cross said. “While the market share of fossil fuels may decline gradually relative to green energy, oil companies will continue to play an important role in powering the world for the foreseeable future.”
But there may be fewer of them doing so.
The Louisiana Oil and Gas Association surveyed its 450 members and found troubling results.
“The survey shows that without some kind of emergency relief, energy producers may be forced to shut-in more than half of the wells they currently operate in Louisiana and potentially reduce their workforce by as much as 70 percent over the next 90 days,” an article on the LOGA website reports. “Some company leaders indicated they are also contemplating bankruptcy. ‘We’re doing everything we can to keep the doors open,’ the head of an independent producer shared. ‘If this persists without any assistance, we’re going to see massive amounts of job losses in our sector.’”
There are 33,650 oil and has wells operating in Louisiana, according to state figures. Half could be shut down, taking 2,200 jobs with them and withdrawing $2.2 billion from the state economy.
LOGA said to help companies survive, the state severance tax should be suspended for a year. The association also calls for the passage of Senate Bill 359 to reduce lawsuits linked to coastal areas, reducing regulatory burdens at the Office of Conservation and lease requirements on state lands and seeking state and federal assistance on increasing storage capacity.
“Our industry is facing the same challenges that every business is in regards to COVID-19,” Briggs said on the website.
“However, we are also having to adjust to the complete collapse of the prices of the products we sell, full storage facilities and a geopolitical war being waged against us,” Briggs said. “Without bold and immediate action from the federal and state governments, many independent energy producers and service companies may not survive this crisis. We need Governor John Bel Edwards, our U.S. Congressional delegation and our state legislature to continue to take action to help protect our workers and the survival of our industry.”
Renee Amar, vice president for policy and government affairs at the Pelican Institute for Public Policy in New Orleans, said legal action often hurts working families the most.
“In Louisiana, we know all-too-well the damaging effects caused by state-sponsored litigation against job creators. Following our state government’s filing of its lawsuit against oil and gas industry companies in 2013, we saw more than 2,000 lost jobs and $70 million in lost wages in the first two years alone,” Amar said.
“Lawsuit abuse is killing jobs and driving away economic opportunity for working families and job seekers in Louisiana, and we discourage all other states from pursuing Louisiana's sue-happy approach to job creators. Those who are most impacted by lawsuits like this are working families, who need access to quality jobs now more than ever before.”
Jim Harris, of the Louisiana Coalition For Common Sense, which advocates for civil justice reform, said the pandemic, the governor’s emergency order and the fact that the Louisiana legislature has been recessed has the entire state in limbo.
“Everyone is concerned,” Harris told the Louisiana Record. “But it’s too early to know. The governor has everything on hold as far as litigation.”
He said some bills had been introduced to deal with the pandemic but they are all frozen.
All legal claims are halted and lawsuits aren’t being filed. Insurance companies are standing still, too. When will things change?
“Nobody really knows,” Harris said.
Louisiana Department of Insurance Deputy Commissioner of Public Affairs John Tobler agreed.
“That is it exactly,” Tobler told the Louisiana Record. “We don’t know.”
A positive development for consumers is a move by automobile insurers providing premium rebates. Tobler said a list of the firms and their rebates was posted on the department website on Wednesday. The companies will return more than $187 million to Louisianans.
Will other insurers follow suit? Will businesses press for insurance rebates? Will the state get involved? Tobler said it’s like so many issues right now: No one knows.