Feature: Texas gas consumer, oil companies see rough side of falling crude prices

Texas teacher Martha Sayre couldn't believe her good fortune when she saw signs posting gas at under two U.S. dollars per gallon.

However, after oil companies began laying off employees by the thousands, she worried the tumbling price of crude oil reflected at the pump indicated a negative impact on the future of oil-producing states like Texas, and possibly the entire country.

Over the months since June 2014, crude oil prices have decreased almost 60 percent to five-year lows amid a supply glut stemming from escalating production and lukewarm global demand, a problem oil companies, large and small, have met with spending and staffing cuts in their worldwide operations.

"My initial euphoria at the low cost of gas was quickly replaced by the realization that, and as the history of gasoline prices shows, crude oil companies will eventually make up any losses in revenue and even manage to profit during the period of cheaper gasoline prices," said Sayre, who is in her 40s, in a recent interview with Xinhua.

Reports from Texas-based oil companies, based on the fourth quarter of 2014, bear out Sayre's misgivings about oil company layoffs, including Baker Hughes, which is laying off about 11 percent of its global workforce.

"Based on current estimates, we expect to undertake a workforce reduction of 7,000 (employees), most of which to take place in the first quarter (of 2015)," said Kimberly Ross, chief financial officer for Baker Hughes in the most recent quarterly report published by the company.

Martin Craighead, Baker Hughes chairman and chief executive officer, added in the report that Baker Hughes expects to see reduced well construction activity in most of its geographical operating segments in the first quarter, with the highest declines in North America followed by Europe, Africa and Russia Caspian segments.

"This industry can't simply hope and wait for oil to climb back over 100 (dollars) a barrel," Craighead stated. "Instead, we must adapt to a new reality of sustained lower commodity prices. A major element in this new reality will be technology. And to that end, we are continuing our investment in fundamental research and product development."

Smaller oil and gas companies have also cut staff and programs in response to the plunge in crude oil prices.

In a recent press release based on the fourth-quarter earnings, Suncor Energy stated there would be "significant spending reductions to its 2015 budget in response to the current lower crude price environment."

To achieve its cost reduction targets, according to the press release, "Suncor plans to defer some capital projects and reduce discretionary spending and that will reduce total workforce numbers in 2015 by approximately 1,000 people, primarily through its contract workforce, in addition to reducing employee positions. There will also be an overall hiring freeze for roles that are not critical to operations and safety."

At Apache Corporation, company spokesperson Castlen Kennedy confirmed in an email to Xinhua that the company was also downsizing its staff in reaction to the crude oil pricing drop.

"The staff reduction constitutes less than 5 percent of our global workforce, or less than 250 of our 5,000 person workforce," Kennedy said.

Sayre, the teacher, nonetheless believed Texans and Americans in general have learned to live with periodic falls in oil prices, including three times since the 1990s, during the oil slumps and embargoes of the late 1970s and early 1980s.

"We have been playing this very same game since the 1970s. In fact, it was this very same game that wiped so-called 'muscle cars,' with their gas-guzzling engines, off the road decades ago," Sayre said.

She said gas consumers should enjoy the low prices at the pump while they can and predicted the cheap gasoline would cause a backlash from the oil companies when the market stabilizes.

"Gas prices will begin to increase eventually and steadily, and this increase will not stop until gas prices are higher than they were prior to this current drop," Sayre said. "That's what always happens. I think I will start using the mass-transit bus system." Endi