Monica Valdez fills up her red 2017 Chevrolet Trax at the Wal-Mart just off U.S. Highway 281 at Jones Maltsberger Avenue. The prices on the sign nearby show regular gas is only $1.74 per gallon.
Valdez is on her way to H-E-B to pick up groceries for her mom after getting off work. While Valdez said she’s enjoying the cheap gas prices, she admits she doesn’t know the oil industry very well, or the impacts of low fuel prices.
“I remember a lot of people hurting last time [gas was this low],” Valdez said, recalling a college friend who had studied petroleum engineering had trouble finding a job during the oil bust of 2015-16.
As of noon Wednesday, the average price of gas in Bexar County was $1.736 per gallon, according to fuel price tracking company GasBuddy. Surrounding counties – Medina, Bandera, Kendall, Comal, Guadalupe, Wilson, and Atascosa – also were under the $2 mark, averaging around $1.80 or $1.90.
Underlying the low prices at the pump are drop in global demand amid the coronavirus pandemic and a price war between Saudi Arabia and Russia. West Texas Intermediate (WTI) crude was trading at around $20 a barrel Friday, the lowest since the price hit $24.29 a barrel in mid-2002, according to fuel market tracker OilPrice.com.
WTI crude was trading at $24.40 a barrel Wednesday. The U.S. benchmark is now under what it was at the bottom of the last bust, at $26.21 a barrel in early 2016.
With many U.S. residents under stay-at-home orders and many non-essential businesses closed to prevent spread of the virus, the demand for gasoline and other transportation fuels has fallen, said Todd Staples, president of the Texas Oil and Gas Association.
“We are in uncharted territory with a demand shrinkage crisscrossing with a supply bulge,” Staples said. “While this current dilemma is applying severe pressure and causing stress to our economy, our members are reliably delivering the oil and natural gas products that fuel our daily lives.”
TXOGA members are analyzing the marketplace and fine-tuning their operations to “ensure the safety of their workers and continued operations,” Staples added.
Reduced demand for fuels and excess supply capital expenditures will likely impact state employment levels in the oil and gas industry until a market rebound occurs, Staples said.
NuStar Energy, a San Antonio-based pipeline and terminal operator, released a statement Wednesday that the company will be cutting its capital expenditures in 2020 by more than $100 million. NuStar will also be cutting operational costs by 10 percent.
“We expect to find additional cuts as well,” said NuStar spokesman Chris Cho. “We have a no-layoff policy at NuStar, as we believe that our employees will be the ones who will help us get through this difficult time.”
NuStar employs approximately 1,500 employees, according to the company’s 2018 annual report.
San Antonio-based Valero, a refiner and marketer of transportation fuels, did not respond to questions about what longer-term effects the slump in oil prices could have on its business. Valero employs over 10,000 people worldwide and has about $50.2 billion in total assets, according to the company’s website.
The low oil and gas prices could also have a negative effect on next year’s state budget. Texas charges businesses a 4.6 percent tax rate on oil production and a 7.5 percent rate on natural gas production, according to the comptroller’s office. Revenue raised from these taxes is divided among several state funds, with 37.5 percent going into the state’s Rainy Day Fund, another 37.5 percent into the State Highway Fund, and the remaining 25 percent to the Foundation School Program.
A statement in early March from the Comptroller’s Office by Comptroller Glenn Hegar said the Texas agency was monitoring weakness in financial markets, including energy markets.
“Certainly, Texas has exposure if oil prices remain depressed for a sustained period of time, and slowdowns in economic activity related to the COVID-19 outbreak could also be a headwind,” the statement released on March 9 said. “We are still only six months into the current budget cycle, however, and it is too early to tell with certainty how current fluctuations will impact long-term economic performance and state revenues.”
Correction: Several quotes were erroneously attributed. The story has been updated to reflect the correct speaker.