Posted on 01/05/2015 4:50:30 AM PST by thackney
Retired Southwest Airlines co-founder Herb Kelleher remembers a Texas bumper sticker from the late 1980s, when falling energy prices triggered an ugly regional downturn: “Dear Lord, give me another boom and I promise I won’t screw it up.”
Texas got its wish with another energy-driven boom, and now plunging oil prices are testing whether the state has held up its end of the bargain.
The Lone Star State’s economy has been a national growth engine since the recession ended, expanding at a rate of 4.4% annually between 2009 and 2013, twice the pace of the U.S. as a whole.
The downturn in energy prices now has triggered a debate over whether Texas simply got lucky in recent years, thanks to a hydraulic-fracturing oil-and-gas boom, or whether it hit on an economic playbook that other states, and the country as a whole, could emulate.
One in seven jobs created nationally during the 50-month expansion has been created in Texas, where the unemployment rate, at 4.9%, is nearly a percentage point lower than the national average.
But a big dose of the state’s good fortune comes from the oil-and-gas sector. Midland, which sits atop the oil-rich Permian Basin, had the fastest weekly wage growth in the country among large counties: 9% in the 12 months ending June 2014.
Now that oil prices have plunged nearly 51% from their June peak to $52.69 a barrel, some Texans sobered by memories of past energy busts are bracing for a fall. The argument among economists and business leaders isn’t whether the state will be hurt, but how badly.
Mr. Kelleher is among the Texans predicting this won’t be a replay of the 1980s oil bust and banking crisis,...
(Excerpt) Read more at wsj.com ...
Thank you! The wizards of smart just hate facts.
would like to hear your opinion, if you have one. thanks for these posts.
you left off Blue Bonnets and Bar B Q
We’re coming to Texas in April to see the Blue Bonnets and to eat Bar B Q in Llano
I think the chart in post #2 shows the facts well. While oil/gas production has been a strong job growth for Texas, we have had far more growth in other areas.
The oil/gas does have a lot of supporting work, and the slow down in oil/gas will have less demand on those industries. But Texas has very significant Refining and Petrochemical industries that do well in times of low oil prices and other feedstocks. There are a lot of ethane crackers for example that are in a rush to get completed to take advantage of the low price of ethane.
very good set of charts — thanks.
right. thanks.
I hear that ethane is now used in electric power generation? do you know anything about that?
“Dear Lord, give me another boom and I promise I won’t screw it up.”
Used to see these in Montana.
Oil is closing on $50. Gas just dropped below $2 here.
I do not believe that is true. If you find any article discussing it, I would appreciate the link.
And I should have searched before I replied.
This is a case where there is not enough pipeline capacity to get the ethane to “market”. When the volume is sufficient, the pipelines will be built. If you can get the ethane to the petrochem market, it is more valuable as a feedstock, than its BTU content for fuel.
Within five years, the house in Massachusetts had appreciated to about $600k, and the house in Houston had dropped to about $100k.
And more point on the same subject, when there is a large, new source of ethane in a region that did not have it before, sometimes the market will come to the supply.
Thailand & Japan Partner to Build 3rd Big Marcellus Ethane Cracker
http://marcellusdrilling.com/2014/09/thailand-japan-partner-to-build-3rd-big-marcellus-ethane-cracker/
Shell Chooses Beaver County, PA For Ethane Cracker Plant
http://www.marcellusconnection.com/archives/909
Infrastructure Projects Connect Marcellus Shale To Ethane, NGL Markets
http://www.aogr.com/magazine/cover-story/infrastructure-projects-connect-marcellus-shale-to-ethane-ngl-markets
That was certainly a hard time for the area. It is much more diversified now. I first moved to Houston in 1989.
On the chart shown here, a huge percentage of professional services are directly related to the profit potential of oil and gas exploration and development. They are companies like Oceaneering and Halliburton. Those companies suffered in oil boon times.
Around that same time, a family from California moved to our small town here in Texas. While still in California, where land prices were booming, they bought a very large, old 2-story home that would have sold for five times as much (at least) in California. They were sure they had a bargain and bought the house at a price just about 3 times its value. They were prize suckers, thanks to the local realtors who manipulated the deal. (I wouldn’t be surprised if the realtors financed the purchase or set it up with one of the local banks.)
Sounds like that’s what happened to your Massachusetts friend. Houston has never been Detroit.
I remember clearly in the ‘80’s all the Texas and Oklahoma license plates in NH where former oil field laborers were seeking construction jobs here.
NH usually has a steady economy because it does not rely on any major resource other than the results of skilled workers and educational capital.
“Experts” are predicting 100,000 jobs lost in Houston in the next six months.
I partied during the early 80s in Texas then starved through the late 80s and early 90s. It was scary times. Lots of boarded up stores.
I’m one of those.
While some are focused on oil production, many like me, provide services to them and others. Fluor, KBR, etc will provide services to oil/gas producers, movers and users. When upstream gets slow, downstream tend to get busier.
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