The Federal Reserve system’s latest “Beige Book” snapshot of the nation’s economic picture provides a relatively upbeat assessment of just about every sector of the economy. When it comes to the energy and natural resources sectors, though, the “Beige Book” is downright blue.
The Fed’s “Beige Book” provides periodic anecdotal information on current economic conditions throughout the 12 Federal Reserve districts in the country. The latest report released on Wednesday found that “economic activity continued to expand across most regions and sectors” from early January through mid-February.
Related: Oil Prices: 5 Things You Need to Know Now
Employment is surging in many sectors of the economy and company payrolls are either stable or expanding, according to the report. Consumer spending rose in most districts, while home sales have also picked up in many areas. Travel and tourism are up. And banking and credit conditions are generally good.
In all, not a bad picture, but the collapse in oil prices has been felt across a number of regions. Oil and natural gas production declined noticeably in the Cleveland, Minneapolis, Kansas City and Dallas Federal Reserve Bank districts, with some areas reporting sharp reductions in the number of drilling rigs. The Dallas area is particularly hard hit, and producers anticipate cuts in capital expenditures during 2015, according to the report.
Meanwhile, crude oil storage continues to expand onshore and off, which is contributing to high crude oil inventory levels across the Gulf Coast. In the Upper Midwest and West, the energy and mining sectors contracted since the last report two months ago. Oil and gas exploration activity fell rapidly in response to lower prices; and the number of active drilling rigs in North Dakota and Montana fell to 128 in mid-February from 179 at the beginning of the year.
Related: The Dark Shadow Hanging Over the Economic Recovery
This generally bad news for the oil industry is likely to persist for some time, absent some unforeseen abrupt change in the international supply/demand picture. Exxon Mobil CEO Rex Tillerson said on Wednesday that he expects the price of oil to remain low over the next two years because of abundant global supplies and relatively weak economic growth, according to the Associated Press.
"People need to kinda settle in for a while," Tillerson said at the company's annual investor conference in New York.
The business plans through 2017 Exxon presented to investors assumed a price of $55 a barrel for global crude. That's about $5 below where Brent crude, the most important global benchmark, traded on Wednesday. It's also about half of what Brent averaged between 2011 and the middle of last year, according to the AP.
Top Reads From The Fiscal Times: