COVID-19 and the drop in oil prices are converging to give the Midland area a double whammy economically, prompting concern in the local business community.
Markets Insider said the coronavirus pandemic’s negative effect on oil demand has lowered oil prices, resulting in a supply gut.
Due to the “downward pressure,” contracts for the crude oil grade known as West Texas Intermediate recently went “into negative territory for the first time ever and has kept the commodity from staging a return to past highs,” Markets Insider said. West Texas Intermediate is among benchmarks in oil pricing, according to Investopedia.
David Blackketter, who grew up in Midland and is vice president of acquisitions and divestitures at Texas Standard Oil LLC, told Marketplace that the recent negative numbers were “kind of a shock.”
“…it was almost too surreal,” Blackketter told Marketplace. “It was kind of like watching a train wreck.”
Blackketter told Marketplace that oil companies cut costs to adjust to oversupply. However, as contractors leave town with the shutdown of wells, service industries such as the coffee and wine bar Bean & Grape in Midland are affected. Owner Ray Blanchard told Marketplace he has begun selling wine at retail prices and to-go meat and cheese boards to compete with grocery and liquor stores.
Todd Staples, president of Texas Oil & Gas Association, said in a guest column March 18 in the Waco Tribune-Herald that volatile swings aren’t new to the Texas oil and natural gas industry and that operators can meet challenging times.
“The drop in global oil prices, coupled with the emergence of COVID-19, has created unusually difficult circumstances to be sure,” Staples said in his guest column. “We are confident that the underlying economic structure in America will enable our country to persevere. …
“Remaining calm and adhering to normal purchasing behaviors is one of the best ways we can help one another during this time.”