State-wide effects expected from dropping oil prices - FOX34 Lubbock

State-wide effects expected from dropping oil prices

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"We've lived and died by swings in oil prices for decades, for generations. But never like this," President and C.E.O. of American Bank of Commerce James Arnold said.

For the first time ever oil prices dropped into the negatives.
Arnold says this will not just hurt the oil and gas industry.

"For every dollar, a drop of oil it costs, $85 million dollars a year. So, when you see a drop in oil prices like we've seen in the last 30 days, it's about a $5 billion dollar impact on the state of Texas," he said referencing the latest from the Texas Tribune.

That means taxes and state budgets will take a hit.

"It affects Texas Tech, it'll affect other universities and public universities, it'll affect public schools. You'll see some severe budget cuts coming," Arnold said.

Experts say it was not just the pandemic that caused this upset in prices.
An on-going price-war between Saudi Arabia and Russia, initially flooded the markets.

"It's a double-whammy. You've got excess supply at a time when demand is very, very weak," energy commerce professor at TTU, Nikki Kantelis, said.

"There's been significant demand destruction. That is, demand has gone away for especially gasoline and on a smaller scale, for the diesel products. There's just not as many people on the road," Mark Griffin, of "Griffin Oil & Propane", said.

Lubbock may not be the epicenter of oil production in Texas, but it is close enough to the border of the Permian Basin to feel some direct effects.

"What we were starting to see was development of companies in Lubbock, supply companies, production companies who say: 'We like the quality of life in Lubbock, the cost of living is a little less, we can locate in Lubbock and commute and have our business at the Permian-Basin without having to be established specifically in the Midland-Odessa area.'"

The most obvious effect right now is gas prices.

In Lubbock drivers can expect to pay about $1.40 to $1.50 per gallon. Down a whole dollar from last year, according to AAA.


4/21/20: The price per gallon at Murphy's on 4th & the loop was $1.43

"Now we've all enjoyed a fairly significant decrease in the price of gasoline we're paying for at the pump," Kantelis said.

"Trucking industries and folks that do a lot of driving and those kinds of things, they'll have a positive benefit," Arnold said.

Industry experts expect some major changes in the coming years.

"Things like this have such a dramatic impact, you're never the same coming out of it," Griffin said.

"The dirt doesn't change, the geology doesn't change. Eventually it will make economic sense for these resources to be extracted. But I think what we'll see, is the players will be different," Kantelis explained.

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