2020 has certainly been a year for the history books, and it’s not over yet. Between the pandemic and social tensions, our nation, and our community, have been experiencing an unprecedented and challenging time. These difficulties have hit home for me as both an Oklahoma native and one of the UMB leaders in the Oklahoma market.
Oklahoma energy industry
From a business perspective, the energy industry is a critical part of Oklahoma’s economy, and it has been hit hard this year. The first blow came with the Russia – Saudi Arabia oil price war in March, which led to a 65% drop in the price of oil. This drop was on top of the 30% fall of oil prices since the start of 2020 due to a decrease in demand. While the Russia – Saudi Arabia price war was resolved in April, the nationwide and worldwide shelter-in-place orders put even more pressure on oil prices and continue to do so today. Perhaps one of the most notable impacts of oil price drops in Oklahoma is that it has caused many energy companies to move all drilling assets to west Texas, which removes revenues from the Oklahoma state budget and jobs from the economy. At present, Oklahoma has only 10 active drilling rigs, the lowest number since rig data has been collected. For perspective, the all-time high number of active drilling rigs in Oklahoma was 212 in 2008.
The U.S. Energy Information Administration forecasts that consumption of petroleum and liquid fuels globally will average 92.5 million barrels per day for all of 2020, down 8.3 million barrels per day from 2019. While consumption is expected to increase by 7.2 million barrels per day in 2021, it’s undeniable that 2020 has been a tough year for the energy sector, and in turn, the Oklahoma economy.
It’s also no secret that unemployment has been a major challenge. In April 2020, unemployment in Oklahoma was 13.7%. By comparison, unemployment in Oklahoma was 4% in April 2019. This has been largely due to businesses having to shut down to abide by shelter-in-place orders. The final number of businesses permanently shut down and jobs lost due to COVID-19 remains to be seen, but by all accounts, the figure will likely be significant.
One of the takeaways I’ve had from these past several months has been how important the role of community connectivity has been while navigating times of crisis. I’m a native Oklahoman and being able to help individuals and businesses in our community as well as seeing our fellow citizens come together to help each other has been heartening. In some Oklahoma circles, we talk about our “grit and grind” when times get tough. Whether it’s been working in my capacity as a banker at UMB to facilitate loans to companies that will help them stay afloat, or supporting the community I love in other capacities, I’ve been inspired to see the true spirit of Oklahoma shine.
Our deep roots in Oklahoma
While some banks have made public decisions to exit energy lending, UMB has continued to support this industry. It makes me proud to be a part of an organization that helps this vital part of our economy. We are able to do this because of our disciplined approach to credit quality, which has helped UMB avoid absorbing the same losses some other banks have.
Those of us who have grown up in Oklahoma and choose to stay here as adults (and there are many of us) have a particularly special appreciation for our community and culture. I know that I personally feel better equipped to provide support both through the bank and within the community because of my deep roots here. And I’ve heard others say the same.
So, my fellow Oklahomans, while 2020 has been a strange year, and it’s not over yet, we all know there are brighter times ahead. In fact, we project that the economy will see an uptick even in the fourth quarter this year. And when those brighter times come, we’ll enjoy them together.
If you are interested in learning more about how UMB can help your business as a financial partner, visit our website.