The rapid spread of the coronavirus around the world, which has infected hundreds of thousands of people and led to the deaths of more than 8,000, also is hammering energy companies. Crude oil prices have plunged over recent weeks, with one of the main reasons being the significant economic slowdown that will result from the global impact of the pandemic.
For oil producers in Texas, this is leading to substantial cutbacks in their operations and production. With oil prices around $30 per barrel, and the potential for them to drop even further, operations in the Permian Basin and southern Texas are becoming unprofitable. The New York Times reports that the most efficient wells in southern Texas can break even with an oil price of around $38 a barrel, while the Permian Basin oilfields can manage if the oil price drops a few dollars lower.
Oil prices are likely to remain at or below these levels for the foreseeable future. In addition to the economic impact of the coronavirus, the failure of oil producing nations, particularly Russia and Saudi Arabia, to reach an agreement to cut back production is also driving prices down.
According to Dallas-based Comerica Bank, reduced output in the oil sector will lead to a slowdown in economic growth across Texas. While the bank projected 3.1 percent growth rate for 2020 in February, which would already represent a slowdown from the 4.4 percent achieved in 2019, Bloomberg suggests that the onset of the Coronavirus crisis could see Comerica peg its projection down even further to just 2 percent.