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Subdude

Oil & the Local Economy

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How does Houston's economy appear to be doing with the plunge in the price of oil (given there is a recession anyway)? Do things seem better, worse or about the same as in the rest of the country?

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Things are still better here than in the rest of the country. Oil hasn't been low long enough to really have an affect yet though. The longer prices stay this low the worse it will get. There are a few layoffs happening now but it won't really get going until March. Then expect another huge round of layoffs in 2010 if the price is still low. I figure around half the jobs in the petrochem engineering business will be gone by 2010 at this rate. The Westchase area and Energy Corridor will be hit hard.

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But how are we as compared to the oil bust of the 1980's? Doesn't seem we are anywhere near that level of correction or even headed down that path, no matter what oil does. All I've ever heard over the past 15 years is that "Houston is diversified" and not nearly as dependent on the oil and gas industry. Was that a lie?

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But how are we as compared to the oil bust of the 1980's? Doesn't seem we are anywhere near that level of correction or even headed down that path, no matter what oil does. All I've ever heard over the past 15 years is that "Houston is diversified" and not nearly as dependent on the oil and gas industry. Was that a lie?

Yes, Houston is more diversified. Petrochem is not as much of the economy as it was in the 80s but it's still a huge amount.

It may not seem bad now but you've got to realize that this downturn hasn't even really started yet. There are still projects that are going to start up in 2009 because they were planned and financed before the downturn. 2010 is when things are going to really start getting bad.

Hosuton is still the petrochem engineering capitol of the world. Projects that are engineered here are being cancelled all over the world. This has all happened within the last 2 months. There is no way this is not going to affect Houston.

Edited by jgriff

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schlumberger is hiring however they are laying off/retiring many of their more skilled engineers.

Yep, there are some companies out there still hiring. There are also some who are hiring just to get the last few jobs out the door before the layoffs.

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But how are we as compared to the oil bust of the 1980's? Doesn't seem we are anywhere near that level of correction or even headed down that path, no matter what oil does. All I've ever heard over the past 15 years is that "Houston is diversified" and not nearly as dependent on the oil and gas industry. Was that a lie?

I seem to remember Barton Smith, the U of H economics guru, quoted as saying that energy is about 50% of the Houston economy, and energy has been the driver of the Houston economy for the last few years. Seems like in the 1980s energy was something like 75-80% of our economy. We are more diversified, but still very vulnerable if energy prices fall off a cliff and stay down for an extended period of time - but obviously not as vulnerable as the 1980s.

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I'm lost...shouldn't the big oil companies be awash in cash after their RECORD BREAKING profits this past year?

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I'm lost...shouldn't the big oil companies be awash in cash after their RECORD BREAKING profits this past year?

Yes, and they are. They are in no danger of going under. But, you don't start up projects that are profitable at $60 oil when the forecast is in the 40s or less. There will be layoffs when business slows, and they will rehire when business picks back up.

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From what I hear(from Haliburton), Oil will be this way until just after Obama getting in and will most likely return to the $100 range by Summer. I have heard that the reason oil is so low is to stimulate retail. People will get out and drive if gas is cheap. It has kinda been a catch-22 though, because at the same time more and more "collapses" seem to be happening to worsen the economic crisis.

Alot of projects have been put on hold right now. I am sure Mark Barnes is having a miserable Xmas right about now. Haliburton is pulling out of alot of projects midstream, and will resume in late January.

Edited by TJones

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