Louisiana’s oil and gas industry is expected to shrink slightly this year due to a combination of economic and geopolitical factors, reports Louisiana Illuminator.
Most analysts are predicting some kind of economic slowdown during the first half of 2023. Oil and gas companies saw record-high profits in 2022 from a surge in demand as most of the world recovered from the coronavirus pandemic and nations shifted their energy policies to address Russia’s invasion of Ukraine. Exxon earned a record $20 billion in profit for the third quarter of 2022. Shell and TotalEnergies reported their profits more than doubled in the third quarter from the same period the year before.
While refineries have increased production to meet demand, many drilling and exploration companies are investing cautiously. According to the professional service firm Deloitte’s “2023 Oil and Gas Industry Outlook,” many companies have prioritized paying their shareholders and saving up cash as economic uncertainty grows and energy prices continue to swing.
Gasoline prices, which peaked at $5 per gallon in June, have since fallen across the U.S. and remained below $3 per gallon in Louisiana as of Thursday, according to AAA’s gas price tracker. Also Thursday, U.S. natural gas prices reached their lowest mark in more than a year as unusually warm winter weather continues to dampen demand.
Continued downward pressure could cancel drilling plans for areas such as the Haynesville Shale play in northwestern Louisiana, LSU energy sector economist David Dismukes says.