In Oil States, Bracing for a Price Bust’s Ripple Through the Economy

[Purveyor]

Source: New York Times

HOUSTON — States dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies.

The concerns are cutting across traditional oil states like Texas, Louisiana, Oklahoma and Alaska as well as those like North Dakota that are benefiting from the nation’s latest energy boom.

Here in Houston, which proudly bills itself as the energy capital of the world, Hercules Offshore announced it would lay off about 324 employees who work on the company’s rigs in the Gulf of Mexico at the end of the month. Texas already lost 2,300 oil and gas jobs from October to November, according to preliminary, seasonally adjusted data released last week by the federal Bureau of Labor Statistics. On the same day, Fitch Ratings warned that home prices in Texas “may be unsustainable” as the price of oil continues to plummet.

In Louisiana, the drop in oil prices had a hand in increasing the state’s 2015-2016 budget shortfall to $1.4 billion and prompting cuts that eliminated 162 vacant positions in state government, reduced contracts across the state and froze expenses for items like travel and supplies at all state agencies. Another round of reductions is expected as soon as January.

Read more: http://www.nytimes.com/2014/12/27/us/falling-oil-prices-have-ripple-effect-in-texas-louisiana-oklahoma.html?_r=0

[Blue_In_AK]

1. Alaska still has a pretty good-sized budget reserve,

but people are definitely feeling anxious. The last downturn we had in the '80s was fairly traumatic and hit a lot of families hard, forcing many to move out of the state. Personally, I am happy to see some of these proposed megaprojects fall by the wayside, and maybe this will be the impetus we need to develop other sources of revenue, even if it means imposing an income or sales tax. People might be a little more concerned with the government they're getting if they had more invested in it. When Big Oil pays the bills, they think they can call the shots.

[True Blue Door]

2. This is just a juicy first taste of what happens

when oil demand starts to collapse from the projected explosion in EV adoption 2017-2020.

[jtuck004]

3. All you have to do is move to where the good jobs are. Isn't that how we got here?

Instead of investing in the country we make the banksters richer and tell working people to just upend their lives for a few pieces of silver. And now the silver is worth less.

Too bad the people don't realize the person they are betraying by not insisting on another way is themselves.

[hadrons]

4. Free market strikes the red righties ....

cry me an amazon

[Paladin]

5. How about restraining the schandenfreude a little?

Of the thousands of people who may lose their jobs in the energy industry on account of low oil and gas prices, only a few will be big money types. The overwhelming majority of the layoffs will target office support staff and field people, folks who live pay check to pay check. The negative effects on these people are nothing to gloat over: strained and broken marriages, substance abuse, college educations delayed or canceled, a few suicides. I know all this because I was in the energy industry for many years, and I lived through several downturns. And yes, oil and gas people are a pretty conservative bunch, but there's an opportunity for Democrats to change that with effective message crafting and outreach. At the very least, let's not take public pleasure in the hard times visited on others.

[Kelvin Mace]

6. They will demand we help them

then knife us in the next election.

[roamer65]

7. We're just a small part of this picture.

What are the Russians, Iranians and Venezuelans going to do when their economies come crashing down? The Saudis have fired the "oil weapon". What will the retaliation be toward the Saudis? You are naive if you don't think it's coming.

I smell war coming. A very big war.

[brett_jv]

8. all the producers have to do is all agree to cut production slightly ...

and prices will rise again. there's only something like 1M brl/day surplus above whats actually being used (which is circa 75M brl/day globally) ... most likely some sort of agreement amongst the big players to all cut production by like 1% will be reached, and the 'glut' producing the current low-ish oil prices will evaporate in no time.

bottom-line we're in the undulating plateau phase of peak oil on the historic/global scale, and the overall price trend is going to be 'up', even if occasionally new tech like fracking comes online and brings it down for a time, like we're seeing now.

[titaniumsalute]

9. While this hurts the oil economies in the US...it helps the oil users

My friend owns a small florist shop. She said besides the product (fresh flowers) and her lease, gas is her biggest expense in deliveries. Lower gas prices means this small business owner makes more money.

My son's friend delivers pizza. Obviously his biggest cost? Fuel. He said he is making a lot more now than one year ago. Money in his pocket to spend.

My company uses hundreds of rental trucks per year and racks up tens of thousands of miles. Huge savings on our fuel costs now.

So while I feel bad for the oil economies and the fallout from lower prices, it on the other hand can help other economies.