The raging oil price war between Saudi Arabia and Russia has highlighted the delicate balance between oil prices and energy sector profitability, and analysts think the industry has reached the tipping point at which some companies simply won’t survive.

“A lot of people argue we’re at that moment now,” said Gifford Briggs, president of the Louisiana Oil and Gas Association. “I think this is it or we are at least crossing into it, when you go south of $30 or $35 a barrel. These are areas that are pretty precarious because when it comes to the business plans and forecasts, those prices aren’t just off, they’re way off.”

Russia’s decision last weekend not to go along with OPEC’s requested production cuts as worldwide demand slowed blew apart the cooperation between the cartel and Moscow. When Saudi Arabia, the world’s largest oil producer, decided to rev up production to drive down prices in retaliation, the war was on.

Oil prices were trading before the OPEC meeting above $40 a barrel. But when the trading guns fell silent Thursday evening, the price of Brent crude, the international standard, stood at $34.21 a barrel.

Things were equally rough with West Texas intermediate crude, the U.S. standard, in which last weekend will live in infamy. After a rocky stretch in which the new coronavirus and other concerns had buffeted the price, the American energy sector went to bed Friday with the price at a still-profitable $41.28 a barrel. The price stood at $31.13 by Monday night and inched up to $31.57 Thursday night.

With prices that low, some companies immediately announced production cuts and sparked worried about layoffs.

In oil patch states such as Louisiana, Texas, the Dakotas and New Mexico, where energy comprises a big slice of the economy, the immediate future looks bleak, analysts said, although lower energy prices can bring a smile for drivers, homeowners and some businesses.

“Good for motorists, bad for the country,” said John Townsend, a spokesman with the AAA auto club’s Mid-Atlantic branch.

Just when drivers will reap the benefits of the price war is not clear — “the price goes up like a guided missile, comes down like a feather,” Mr. Townsend noted — although the national average gasoline price of $2.35 a gallon is the lowest in a year.

Pump prices should fall more and perhaps crack $2 a gallon in many states, as it already has in some energy-reliant states. On Wednesday, the wholesale price of gas stood at $1.10, “which has the potential to mean $1.70 a gallon or even less in some areas,” said Don Redman, a AAA spokesman in Louisiana.

That means that come Memorial Day, the kickoff of the summer travel season, consumers should be finding some excellent prices, especially if the coronavirus outbreak has subsided.

“The rest of the country — those areas that do not have strong ties to the energy sector — are going to be relishing these low energy prices,” said David Dismukes, a professor and executive director of Louisiana State University’s Center for Energy Studies.

Free market economists largely cheered what was depressing the energy sector.

“All other things equal, low oil prices are good for oil users, and the latter includes all of us,” wrote David Henderson, a research fellow at Stanford’s Hoover Institution.

“It’s roughly a wash for the U.S. economy, and it’s good for the overall world economy,” he said.

But the economies of key energy-producing states could take a huge hit long before Memorial Day.

North Dakota, which has become a major shale oil producer, has 8.3% of its workforce involved in the energy sector, with 31,973 workers. The state is followed by Louisiana’s 6.7% (119,900 workers) and New Mexico’s 4.9% (34,890), according to the 2019 U.S. Energy Employment Report.

Texas, meanwhile, has the most energy-sector employees, with 543,163 involved in fuels or their storage, transportation and related industries. Energy jobs comprise 4.9% of the state’s workforce.

That is more than 725,000 jobs in four states, many of which could be in jeopardy if the price war stretches out weeks. On top of possible mass layoffs, for every dollar that comes off an oil barrel’s price, millions more are lost in tax revenue.

The booming U.S. energy sector is a major element that triggered the price war, as fracking has pushed the United States past Russia as the world’s biggest energy producer. The U.S. produced 400 million barrels of crude in December and is exporting a record 3 million barrels a day, up 45% from 2018.

So great was the U.S. output that last year for the first time, the flow in the “LOOP” pipeline was reversed. The pipeline used to carry more than 1.7 million barrels a day into the Louisiana network of storage tanks and refineries but now carries oil to be exported.

“The price war could bring some consumer benefit in terms of lower costs of energy, free up some discretionary spending and lower transportation costs,” said Pierre Conner III, who heads Tulane University’s Energy Institute. “But for the large refinery complex in and around the Gulf Coast, their feedstock is oil.”

Mr. Conner and others pointed to a “perfect storm” of supply and demand in which the price war dovetails with collapsing demand because of coronavirus fears and travel restrictions. Those increased Wednesday night when President Trump announced a 30-day halt on flights from Europe, on top of stoppages already in place for parts of Asia.

The grim picture is enough to get some savvy market players fleeing toward safe havens such as gold.

“If there were ever a time for Middle East currency dollar pegs to break, this is it,” tweeted Dan Tapiero, a co-founder of DTAP Capital and other investment funds. “Saudi, Qatar, UAE trouble. ME stock markets in free fall, oil cartel collapse, China recession, no bottom for oil, fiscal revs to drop. NEW REASON to own gold and bitcoin.”

Meanwhile, many U.S. energy companies are highly leveraged. Oil exploration and extraction is expensive, and the recent U.S. boom has been even pricier because much of it has been on private land rather than offshore lots sold at auction.

Consequently, there has been a rush to “be first” and to pay premium prices for mineral rights on land, all of which has been especially expensive for the fracking industry, which made the U.S. a net exporter.

“The perfect storm: low commodity prices and demand is getting hammered,” Mr. Dismukes said. “There’s no one to sell to. China’s been closed down, Asia is slowing down, banks aggressively — it’s all a huge demand-side problem.”

Rep. Sean Casten, Illinois Democrat, said it would be foolish to avoid asking whether the problem could extend to the broader banking sector. The question haunting the energy entrepreneur today could be in the boardroom tomorrow, he said.

“At what point are we in default?” Mr. Casten said. “I think we need to be thinking about this now.”

Mr. Casten tried to probe Wells Fargo CEO Charles Scharf this week about his bank’s and others’ exposure to fossil fuel operations. Mr. Scharf was wary about revealing Wells Fargo’s energy sector positions, but Mr. Casten thinks it is about $42 billion, which makes it a midlevel player.

“The energy markets never fully recovered from 2015, when a lot of people lost their shirts,” said Mr. Casten, who was an entrepreneur in sustainable energy prior to entering Congress. “And a lot of people could lose their shirts now, so we need to be looking at what degree loans are tied to the value of a sinking commodity.”

The sense of unease is heightened by the knowledge that there is little the U.S. can do to influence what is primarily a spat between Vladimir Putin and Mohammed bin Salman, the Saudi prince who appears to be in control of Aramco, the state oil company.

Russian brinkmanship has Kremlin officials boasting that they can withstand oil priced at $10 a barrel for years, given their cash and gold reserves.

“The president can calm market fears down, or try to, but there’s only so much they can do because you can’t catch a falling knife,” Mr. Dismukes said.

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