Pandemic, price war led to challenging year for oil; Wyoming's rig count fell to zero for first time since 1884
December 31, 2020
CASPER — The ubiquitous heads of pumpjacks, usually faithfully bobbing up and down across Wyoming’s landscapes, largely came to a standstill this year.
A series of events devastated the U.S. oil and gas business, and the Equality State was not immune to the damage.
This past year, Wyoming oil and gas developers have been slammed by depressed market conditions caused by a glut in oil supply worldwide and a global economic recession.
Price volatility has long been a normal fixture in oil and gas global markets. Oil and gas operators said Wyoming’s energy industry knows how to ride the choppy waves of the global market.
But this year was different. In March, a global oil price war broke out between Russia and Saudi Arabia and sent prices tumbling. Simultaneously, the COVID-19 pandemic brought the economy to a near standstill, chilling demand for fuel.
By April, the glut in supply and drought in demand caused oil prices to go negative.
West Texas Intermediate contracts for May sold at negative $40 per barrel, plummeting roughly 300% a day before the deadline to purchase them.
Only two months later, on June 26, workers laid down Wyoming’s only remaining gas rig, dropping the state’s total rig count to zero.
It marked the first time the state’s rig count had reached zero since 1884. At that time, Wyoming was still a territory.
The rig count is typically a prime indicator of oil and gas activity levels. In August 2019, Wyoming’s rig count hovered around 37.
Measures taken to stem the tide of COVID-19 infections slashed petroleum consumption to the lowest levels the U.S. Energy Information Administration has recorded since it began collecting this data in the early 1990s.
Though a boon for consumers, flat crude and cratering natural gas prices hit already struggling energy producers hard in 2020. Lackluster oil and gas prices left several operators no choice but to tighten their belts.
An estimated 76,000 direct oil and gas jobs were lost across the U.S. between February and June alone. The number of workers still employed in the sector hit a low not witnessed since around 2006.
Though oil prices have rebounded since April, thousands of energy workers remain without work.
Wyoming is among the top 10 oil and gas producers nationwide, and it holds some of the country’s largest coal and trona mines.
Thanks to these lucrative natural resources, Wyoming is one of few states able to rely almost exclusively on revenue from fossil fuels to fund critical public services. For years, the public has called on lawmakers to diversify the state’s economy. Nonetheless, Wyoming continues to rely heavily on minerals for funding.
The state’s budget has become increasingly dependent on oil and gas for income as the coal sector contracts. Wyoming’s reliance on oil and gas also means that a crash in energy markets can send the state’s finances in a sudden downward spiral.
Though prices have inched back up in the months since the global price war and the pandemic began, the continued spread of the virus worldwide and uncertainty over another potential oversupply of oil has plunged several energy firms into insolvency.
In a statement supporting public health measures enacted by Gov. Mark Gordon earlier this month, the Petroleum Association of Wyoming said the losses experienced this year can’t be reversed until the pandemic subsides and global activity resumes.
Wyoming’s oil industry has been on the road to a sluggish recovery since falling this spring. But a full recovery for the families directly and indirectly affected by the downturn in oil and gas will take time, not to mention a full re-imagining of Wyoming’s economy. In many cases, the external factors causing changes in oil markets — supply, price, demand, competition — remain far beyond Wyoming’s control.