The 2023 Gulf Coast Energy Outlook released by Louisiana State University this week shows Louisiana lost roughly 8,700 upstream oil and gas jobs during the pandemic, while Texas lost about 83,000, accounting for 26% and 35%, respectively.
By August 2022, Louisiana had gained back about 2,500 oil and gas jobs, while Texas regained about 44,700. David Dismukes and Gregory Upton, Jr., with the LSU Center for Energy Studies, predict that trend to continue into 2023, before slowly declining for the next couple of years.
“It’s important to note that although employment is expected to increase over the forecast horizon, these model results are not anticipating employment in either state to reach pre-COVID levels over the forecast horizon,” the report read.
The GCEO expects upstream oil and gas job numbers to peak in the second quarter next year, then decline steadily in both states through 2025.
“This is driven by a combination of projected increases in oil and gas production alongside futures market prices that are currently in backwardation (expected to decline over the forecast horizon),” according to the report. “Although, we note that given the margin of forecasting error, upstream employment post the peak forecasted in 2023 should be considered a random walk, for all intents and purposes.”
It’s a similar situation with refining and chemical manufacturing employment, which also declined during the pandemic, though as drastically as upstream oil and gas jobs.
“For Louisiana, the GCEO anticipates employment to first recover from the recession and then modestly increase over the rest of the forecast horizon,” the report reads. “Specifically, the GCEO envisions employment to increase by about 1,450 jobs by the end of 2023, or about a 3.9% increase. Employment growth is expected to slow thereafter, gaining approximately 600 jobs in 2024 and 700 jobs in 2025.”
Oil and gas prices, meanwhile, are expected to fall next year after significant increases tied to the war in Ukraine.
“Oil prices that are currently trading at over $90 per barrel (spot market) are anticipated to decline by the end of 2023, when oil price futures fall to about $80 per barrel,” the report reads. “In the long run, oil futures converge to prewar levels and even fall below prewar futures prices by 2030.”
Natural gas prices are expected to fall from $5.50 per million British thermal units in 2023 to $4.70 per million British thermal units in 2024, then remain about $1.40 higher than anticipated before the war.
Production of oil and gas is expected to increase by about 30% over the next decade, though the LSU models are based on continued offshore drilling in the Gulf of Mexico that’s currently at the center of legal disputes.
The report notes, however, that the Inflation Reduction Act requires the Department of Interior to follow through with at least two lease sales in the Gulf next year.
“Although some have communicated skepticism of this process, suggesting that the Biden Administration will continue to make attempts at discontinuing offshore activity, the current law of the land is that offshore leasing will continue,” according to the report. “As with past GCEO’s, our modeling assumptions are based on current policies, not predictions about future policy actions that could occur.”