While so far the layoffs haven’t shown up in the data, a state forecast assumed a 10 per cent decline in its oil and gas-related jobs in 2015 and 2016, that translates into a loss of about 3,700 jobs and lost wages of about $425 million
Low oil prices and an industry cutback in spending will translate into thousands of lost jobs, millions of dollars in reduced revenues and slower economic growth in Colorado, according to a pair of state revenue forecasts unveiled at the Capitol.
But beyond that, the crystal balls remain murky for the state’s top economists.
'There’s a lot of uncertainty, and it could really go a lot of different ways,' Larsen Silbaugh, an economist with the Legislative Council, which advises the legislature.
'The question is what will prices do this year and there’s disagreement about that,' he told a legislative panel. How low oil prices will go, and how long they’ll stay low, are the critical questions.
US oil prices peaked in June 2014 at $107 per barrel, sliding to less than $50 per barrel during the first months of 2015 due to a glut of oil in the global market caused by the booming US oil industry. And US energy companies have reacted swiftly by cutting budgets and announcing plans to layoff thousands of workers across the nation. Layoffs have hit Colorado’s oil and gas industry, which by some estimates has cut its spending in the state by more than $2 billion in 2015 compared to last year, although individual companies have been reluctant to say how many people have been – or will be – affected by the cuts.
So far, the layoffs haven’t shown up in Colorado’s employment data – yet. And the state’s economists said they believe Colorado’s overall economy is strong enough to absorb a downturn in the energy sector.
Colorado employers added 3,700 payroll jobs in January, while the state’s unemployment rate was unchanged from December at 4.2 per cent, the Colorado Department of Labor and Employment reported. Unemployment is at its lowest level in the state in just over seven years, according to newly revised estimates.
But the Office of State Planning and Budgeting (OSPB), which presented its revenue forecast to the legislature in tandem with the Legislative Council, says its forecast assumed a 10 per cent decline in Colorado’s oil and gas-related jobs in 2015 and 2016.
That translates into a loss of about 3,700 jobs and lost wages of about $425 million, the OSPB forecast says. Given that oil and gas jobs pay really well and those wages, when spent, support jobs in other industries, the state may be looking at a total loss of about $975 million and roughly 13,000 jobs, the OSPB forecast says.
Some of those workers may be absorbed into the state’s construction industry, which has been clamoring for workers due to a boom in activity in the last few years.
The office’s forecast also says the industry slowdown will reduce Colorado’s job growth in the next few years, from 3.3 per cent in 2014 to 2.6 per cent in 2015 and 2.8 per cent in 2016. The slowdown also will cause the state’s unemployment rate to edge upward, to an average of 4.3 percent in 2015 and 4.4 per cent in 2016. But there is a silver lining to the slowdown.
Low oil prices have already led to big savings at the gasoline pump. Colorado’s average gas prices are about $2.23 per gallon, down from $3.61 per gallon a year ago, according to AAA’s FuelGauge report.
Nationally, the low prices are expected to mean $710 in savings for the average household – or about $1.7 billion in savings for Colorado households, the OSPB forecast says.
The slowdown also will mean less money going to the state in the form of severance taxes, money energy companies pay to the state based on the value of the oil, natural gas, coal and other minerals mined in Colorado. The biggest share of the state’s severance tax money comes from taxes on oil and gas production.
The two budgets, from the Legislative Council and the OSPB, both say the amount of severance tax money is expected to drop by more than 60 percent in fiscal 2016, compared to fiscal 2015.
The OSPB forecast says severance tax collections in fiscal 2015, which are based on oil produced and sold in 2014, are expected to be about $369.1 million – that’s up 37 per cent from fiscal 2014.
But the following year, in fiscal 2016, collections are expected to plunge to $141.8 million – down 62 per cent from the previous year, according to the OSPB forecast.
