Louisiana faces major budget shortfall as oil markets crash

Louisiana hit hard by crashing oil and gas market

(WAFB) - Thousands of oil and gas jobs in Louisiana are potentially on the chopping block as the price of crude oil continues to tank.

The market was already down, with crude oil hovering around $30 to $40 per barrel at the start of 2020, a far cry from the $50 to $60 per barrel at which is was supposed to be priced. But no one predicted the market would depress to historic lows.

“We’re down about 30 million barrels per day or more because the global shutdown of the economy,” said Gifford Briggs, president of the Louisiana Oil & Gas Association.

The market has been saturated with oil in part because of the lack of demand as Americans are largely under stay-at-home orders.

“We need to get our state economy moving again, we need to get our country’s economy moving again, we need the global economy moving again if we’re going to minimize the impacts to the oil and gas industry and ultimately the state,” Briggs said.

More so than the potential for job cuts, the crumbling market presents problems for the state. Oil and gas makes up about 10% of Louisiana’s budget. For every dollar oil goes down, Louisiana loses roughly $12 million annually. Loren Scott, a Baton Rouge economist, estimates already, that shapes up to a loss of $20 million per month to the state’s budget.

To offset that loss, lawmakers will likely face making cuts, but that’s tricky.

“It’s not like you can spread it around and cut DOTD or cut prisons or something like that,” Scott said. “The way the system is set up, pretty much you’re limited to higher ed and significant cuts to higher ed and healthcare.”

The easy solution is to reopen the state and allow the economy to function, but even then, Scott says Louisiana’s oil and gas industry will likely feel the effects for quite some time.

“When this thing is over, the State of Iowa, Nebraska, New York, the rest of them, they’ll start to come out of it, they’ll be fine,” he said. “The State of Louisiana, we’ll still have a drag. We’ll have an anchor and that is these low oil prices.”

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