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Oil, gas industry predicted to remain sluggish

by Minden Press-Herald

Economists say that while Louisiana is on the upswing economically, the forecast is fairly flat for 2017 with a small upward swing by the end of 2018.

Dr. Loren Scott, a professor at Louisiana State University in Baton Rouge, said northwest Louisiana has been in a decline since 2008.

“Your corner of the state is down about 10,500 jobs down from where it was back in 2008, when it peaked,” he said.
“There’s just a number of body blows that you’ve taken since then. Your primary problem has been a reduction in activity from the Haynesville Shale.”

He said in 2008-09, the northwest Louisiana region had in excess of 100 drilling rigs and now there are about 20 or less.

“There’s been a decline in natural gas prices since 2014,” he said, adding that the Haynesville Shale is a dry shale, meaning not much oil, but more natural gas.

The Louisiana Economic Outlook forecasts natural gas to go from $2.50 mmbtu this year to just under $3 mmbtu in 2018.

“Despite substantial good economic news in the state, the heavy anchor of the depressed extraction sector will keep the overall state economy basically flat in 2017 (-700 jobs net), with recovery starting in 2018 (an addition of 13,700 jobs or .7 percent growth),” economists said in the LEO. “After coming tantalizingly close to the 2 million employment mark in 2015, problems in the oil patch will leave the state about 15,000 jobs short of that record by 2018.”

Scott said other areas adding to the decline is the closing of General Motors, the layoffs at Libbey Glass, and the casino competition with the casinos in Oklahoma.

However, healthcare remains a strong industry due to the baby boomer generation.

“A lot of the baby boomers are now in their 60s and 70s and they need healthcare,” he said. “I don’t see healthcare going down anytime in the near future, because even during the recession, everybody still needs to go to the doctor.”

Minden Economic Development Director James Graham looked farther than 2018, into about five years from now, saying growth will occur in technology, tourism and infrastructure.

“There could be a positive increase in the investment of infrastructure over the next two or three years, provided the U.S. Congress and the president are able to agree on an infrastructure bill,” he said. “Our oil industry continues to get back on its feet.”

Scott said the price of oil is at $54 per barrel and in order to make a real difference in economic growth, it would need to be above $60 per barrel. Scott and Graham said the oil industry is returning, but slowly.

But there is no real way to predict the price of oil due to its variables, they said.

“One of the variables is OPEC itself,” Graham said. “Will they continue to agree to keep production stagnant? That’s what’s helped the price of oil to gradually increase. If other things happen in the economy, if alternative energies keep making their way into the economy in terms of market share, we could see our reliance on old line energy decrease over time.”

The good news, Scott said, is that with modest improvement in the price environment combined with improving costs should give the region a jumpstart in later years.

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