Falling Gas Prices Could Harm Colorado's Oil & Gas Industry
DENVER (CBS4) - While prices at the pump are pleasing to many drivers so far this holiday season, the plummeting prices of oil are a bit concerning for Colorado's oil and gas industry.
Coloradans are paying an average of $2.52 per gallon. That's 54 cents less than a year ago when it was $3.06.
"Colorado has had a significant increase in production. At these prices I'm not sure that will continue," said Stan Dempsey, president of the Colorado Petroleum Association.
"This is pretty serious stuff," Dempsey said. "It's got huge economic consequences."
Colorado's oil boom is largely due to hydraulic fracturing, which is more expensive than conventional drilling. With U.S. oil prices dipping below $56 a barrel this week -- the lowest price since 2009 -- some companies are scaling back fracking production next year in places like Weld County.
"We'll be spending a little less money," said Doug Hock, a spokesman for the energy company Encana. "We'll be drilling probably 30 to 35 wells whereas in 2014 we drilled about 50 wells."
"This is a $30 billion industry in Colorado that employs 100,000 people both directly and indirectly," Dempsey said. "If there's a slowdown in drilling that will certainly have an impact on Colorado's economy."
Encana says they don't anticipate any layoffs despite their cutbacks, however Colorado could see a major loss tax revenue if oil prices keep falling.
"Those taxes are valued partially by the value of the product. So if oil goes from $100 to $50, it's going to be a significant cut in revenue for both Colorado and local governments."
It could be another three to six months before the impact of low oil prices is fully clear in Colorado.