The Eyes Of Texas Are On Falling Oil Prices, And Struggling Energy Sector Stocks

The continuing downward trend may affect local economies from Houston to the West Texas oil fields.

By Jill AmentNovember 21, 2018 7:09 am,

Many Texans may be paying attention to the stock market right now, as energy companies continue to lead a downward charge. In fact, the energy sector worldwide lost about $1 trillion in value during a 40-day period that began in early October, reports the Houston Chronicle. This means some energy companies may have a difficult time borrowing money, and hiring and retaining employees. For tens of thousands of Texans from Houston to West Texas, this impacts job security, retirement plans and confidence for buying homes, cars and holiday gifts.

James Osborne, energy reporter in the Houston Chronicle’s Washington bureau, says the market decline is simply due to plummeting oil prices.

“Production around the world has been pretty high lately,” Osborne says. “There’s a lot of expectation with Iran sanctions going back into place that oil would come off the market and it seems in some countries, producers were anticipating that and getting ready for it, but that hasn’t really happened. The Trump administration handed out a number of waivers to different countries so they could continue to import Iranian crude. There’s just a lot of oil on the market right now.”

Oil and gas companies have started to pump more oil out of the ground to maintain profits as supply grows and prices drop.

“That’s been the pattern again and again,” Osborne says. “When they get in these sort of situations they tend to get as much oil out of the ground as they can as long as they can. They’ve sort of been on shaky financial ground for a while, spending far more money than they’ve been taking in. They have been reigned in a bit by Wall Street lately. There was some concern that they were sort of overspending and could get themselves into a bubble situation.”

The Organization of Petroleum Exporting Countries, or OPEC,  will meet in Vienna at the beginning of December and has signaled there will be a production cut. However, there’s a fear among investors that the downward trend of the energy sector may not be a short term issue.

“There’s just so much more competition in the energy sector than there used to be,” Osborne says. “Renewable energy is coming on huge. Cars are getting more efficient. There’s just a lot of long term downward drags on the oil sector that a lot of people around the Texas oil industry are taking note of and are certainly concerned about. I think it’s just a matter of when these things begin to materialize, but for right now it’s certainly a tough time for the industry with the prices down where they were.”

By Brooke Vincent.