By David Jacobs | The Center Square
Oil futures closed in negative territory for the first time ever Monday, which means investors would have to pay someone to take a contract for oil to be delivered next month off their hands.
While tumbling oil prices could benefit cash-poor gasoline consumers who still need to drive during the COVID-19 pandemic, the trend is bad news for Louisiana’s economy and to any effort to craft a balanced state budget.
The May futures price reflects a glut of crude oil and a lack of available storage space, analysts say. Oil that is scheduled to be delivered in June fell more than 18 percent Monday to about $20 a barrel.
When adjusted for inflation, oil is trading at the lowest price ever, according to a report cited by the Louisiana Oil & Gas Association.
“The crisis facing the industry is impossible to overstate,” LOGA President Gifford Briggs said. “The global demand destruction of oil, caused by the worldwide shutdown of the economy, has sent prices to the lowest in history when adjusted for inflation. There is no magic pill that will save the thousands of jobs that will be lost, but we can immediately take steps to limit the losses.”
LOGA is calling for “severance tax relief, royalty relief, and an end to the government sponsored coastal lawsuits” to prop up the industry.
Gov. John Bel Edwards said the administration is watching the oil markets and hoping to see the situation stabilize. Though Louisiana’s state budget isn’t as dependent on oil as it once was, taxes and royalties from oil and gas production bring into state coffers about $750 million annually.