Dirt roads zigzig through the Uintah Basin, connecting thousands of oil and gas wells. The area is rich in natural resources, and many of the towns that have sprouted up in this rangeland are built around the drilling and extraction of these resources.
The future of these wells—and the people who make a living from them—is uncertain, as oil prices remain at some of the lowest levels seen in years.
“In the month of December, oil prices have decreased between 35 to 40 percent,” said Benjamin Blau, a professor of economics at Utah State University.
Blau said these low prices stem from a slower global demand for oil while production is increasing.
“Currently, Utah is ranked 11th in the nation in oil production, and so whenever oil prices decrease, you can expect to see slower production,” Blau said.
Nearly three weeks ago UPR spoke with Allen Parker, Vernal assistant city manager. At that time, he hadn’t really seen any changes to the economic indicators he uses to track the health of the area. The unemployment rate was steady at 2.9 percent and he said he had heard that oil companies were moving workers from other areas of the nation, where drilling is more expensive, to the basin.
“I honestly haven’t seen really any changes from my seat,” Parker said. “I have some close friends that own a couple of small businesses here in town and they tell me the same. They haven’t seen any real changes with the drop in the crude oil price out there.”
Between when UPR spoke with Parker and now, things seem to be changing for the worse. How long the prices will stay this low, and how serious the problem is going to get is unclear, but one thing that is obvious is that companies are starting to lay people off.
“Every day I go to work, I worry that it might be the time they say, ‘We’re closing up shop,’” said Lance Richens.
Richens is a lifelong resident of Vernal and works for a company that services the drilling rigs. For him, cycles of prosperity and drought are a normal part of living in the area—but he said he’s never seen something like this happen so quickly.
“About the last three weeks or so all the oil field companies have started to lay off, and a lot of the oil companies now are laying their drilling rigs down because it’s just not cost effective to drill at this time,” Richens said.
Tammie Lucero is the Uintah County economic director. She thinks oil companies are trying to figure out what to do next.
“What I have been told, and what I’m seeing, is sort of a holding steady at this point, meaning not a whole lot of capital investment and just seeing how things go in the next few months to a year,” Lucero said.
“Unfortunately, a lot of times local government doesn’t have a lot of power or control when it comes to these things that happen at a national or international level,” Parker said.
Both Parker and Lucero say the area has been working to diversify into other income sources, such as tourism and recreation, to offset their reliance on the oil and gas industry. While this is helping, the Basin’s economic bedrock remains resource extraction, and if there are fewer workers and money from that sector, everyone will feel it.
“If this continues and oil doesn’t rebound soon, I think a lot of people are going to be without work, and of course that’s going to trickle down into the rest of the town as far as restaurants and the stores and that because people are not going to be spending money,” Richens said. “People have been through this boom bust cycle before and a lot of them have put a little money away, and also know that when it starts to slow down like this, it’s time to stay home. They don’t spend money like they used to, so it’s going to hurt the entire economy of the Basin.”
Economist Blau doesn’t think all of the news is negative, however.
“There’s a tradeoff between a reduction in employment in some areas of the state, including the Uintah Basin, and there’s certainly an increase in consumption in the state because money that would have otherwise been going to purchase gasoline is now either spent here in the country or close by,” Blau said.
“It’s good for everyone that gas prices are down, it sure makes it easier on everyone as far as buying fuel and that’s great,” Richens said. “But everyone need to remember that in Utah, that is tied to a lot of people’s jobs too.”