From the editor: Living off oil and gas not always a festival

In 1901, the first oil well in Louisiana began producing near Jennings. Morgan City’s stake in the energy industry became nearly all-consuming after McDermott engineered the first steel rig out of sight of land in 1947.
In 1973, the Yom Kippur War and the Arab oil embargo put the Tri-City area on a four-decade roller coaster ride.
And in 2015, here we are, just in time for the Louisiana Shrimp and Petroleum Festival, on the part of the roller coaster that can make the stomach feel a little queasy.
Chris John, the former congressman who now leads the Louisiana Mid-Continent Oil and Gas Association, has a different way to describe one Dickens of an economic tremor: “This is the best of times, and the worst of times.”
Not that it’s necessary to tell anyone around here, but the “worst of times” has to do with the price of oil. When we spoke a couple of weeks ago, John was talking about oil in the $40- to $50-per-barrel range. The price dipped below $40 for a couple of days last week. It recovered, but only slightly, with futures going for $45 a barrel Monday.
“Oil was $100 a barrel 13 months ago,” John said.
Cruise up U.S. 90, and you’ll find gasoline for $2.19 a gallon just on the other side of the bridge. By the time you get to Lafayette, gas is already below $2.
If we’re thinking like motorists, those prices make this the best of times. Gas is cheaper now, in inflation-adjusted dollars, than when the signs at the full-service stations offered 30-cent gasoline in the ’60s.
On the downside, the fragile budget deal reached in the 2015 Louisiana Legislature may not survive six months. Each $1 drop in the oil price costs the state treasury at least $4 million a year. The current budget is based on $62 oil.
Closer to home, St. Mary Parish sales tax collections were down 14 percent in July from the same month a year ago. And, although St. Mary employment was up in June by about 90 jobs from June 2014, unemployment rose to 8 percent from 6.9 percent last June.
This recent history may lead us to think something great went terribly wrong somehow.
The combination of directional drilling and hydraulic fracturing revolutionized natural gas production first, then moved on to petroleum. Ohio, North Dakota and other states suddenly became major energy producers.
Not even the BP oil spill and the much-maligned drilling moratorium slowed the momentum. Energy employment continued to increase throughout 2010.
On Sept. 9, 2011, President Barack Obama gave a jobs speech before a joint session of Congress. St. Mary’s congressman at the time, U.S. Rep. Jeff Landry, R-New Iberia, held up a sign that said “Drilling = Jobs.” Two days later, Goldman Sachs issued a bit of economic prophecy that said the United States would be the world’s largest petroleum producer by 2017.
According to the U.S. Energy Information Administration, that future is now. In terms of total supply, the agency said, the United States produced a shade less than 14 million barrels of oil a day in 2014. That unseated the former No. 1 and 2 producers, Russia (10.9 million barrels) and Saudi Arabia (11.6 million).
Did we produce too much too quickly? The rush into fracking played a role in increasing supply, just as China’s economic slump played a role in decreasing demand. New U.S. autos are more efficient these days.
But John also talked about the best of times.
He doesn’t put much stock in one additional threat: The nuclear proliferation agreement with Iran is supposed to put another half-million barrels onto the world market. John said that troublesome nation will need time to rebuild its production infrastructure before making a big impact.
Some companies may have rushed into fracking too far and too fast, but others have planned wisely and well for the long term, John said.
And there’s the Gulf of Mexico. The rig count has bounced up and down, but John pointed to 40 deep-water platforms, protected to some extent from market fluctuations by the long lead times they require. The Energy Information Administration said eight new deep-water projects have come into being this year, and the agency projects another eight in 2016.
John laughed when asked to predict the direction prices will go, saying he knows better than to do that. Former Shell President John Hofmeister, now the CEO of Americans for Affordable Energy, took a stab at it for CNBC. He predicted that oil will be back above $80 by the end of the year.
Your gas card might take a hit, but your legislator will love it.
One thing is certain: Oil prices will move, and no one will see the big shift coming. And at this point, there’s not much of anywhere for prices to go but up.

This column was written by Bill Decker, managing editor of The Daily Review. Reach him at bdecker@daily-review.com.