Posted on 01/20/2015 6:43:19 AM PST by thackney
...businesses and workers are bracing for the worst. A Mexican restaurant has started a Sunday brunch to expand its revenues beyond dinner. A Mercedes dealer, anticipating reduced demand, is prepared to emphasize repairs and sales of used cars. And some well-off oil company managers are cutting back at home, rethinking their vacation plans and cutting the hours of their housemaids and gardeners.
Dexter Allred, the general manager of a local oil field service company, began farming alfalfa hay on the side some years ago in the event that oil prices declined and work dried up. He was taking a cue from his grandfather, Homer Alf Swinson, an oil field mechanic, who opened a coin-operated carwash in 1968 — just in case....
The Dallas Federal Reserve recently estimated that the falling oil prices and other factors would reduce job growth in Texas overall from 3.6 percent in 2014 to as low as 2 percent this year, or a reduction of about 149,000 in jobs created....
Midland’s recent good fortune is plain to see. The city has grown in population from 108,000 in 2010 to 140,000 today, and there has been an explosion of hotel and apartment construction. Companies like Chevron and Occidental are building new local headquarters. Real estate values have roughly doubled over the past five years, according to Mayor Jerry Morales.
The city has built a new fire station and recruited new police officers with the infusion of tax receipts, which increased 19 percent from 2013 to 2014 alone. A $14 million court building is scheduled to break ground next month. But the city has also put away $39 million in a rainy-day fund for the inevitable oil bust....
...always in the back of your mind — being laid off and not having the security of a regular job,”...
(Excerpt) Read more at nytimes.com ...
Texas is used to oil cycles. North Dakota isn’t.
Obviously the answer to the problem is for us to use more oil.
The North Dakota Boom That’s Going Bust After Oil’s Plunge
http://www.thefiscaltimes.com/2015/01/12/North-Dakota-Boom-Thats-Going-Bust-After-Oils-Plunge
The breakeven oil price, the price level needed to drill a new well, for Divide County is $85 a barrel, according to the state; for Williams, it’s just $37. The difference is due to geology, among other factors.
It is perhaps little surprise, then, that a company focused exclusively on Divide County has emerged as one of the earliest hit by the collapse in oil markets. Last week American Eagle Energy Corp said it had stopped drilling and sold off its oil hedges for a cash infusion. Only a few are holding out, hoping things turn around.
I will happen if prices stay low enough.
The cure for high prices is high prices. The same cure works for low prices as well.
Yup, Midland learned from Houston in the 80’s.
O, the hugh manatee!
:: And some well-off oil company managers are cutting back at home, rethinking their vacation plans and cutting the hours of their housemaids and gardeners. ::
Egads, thackney...the NYTimes can’t let go of the “perceived excesses” of the Rockefeller legacy!
Maybe I need to retire back in yankee-land?
of course this is why the saudis are doing it. the goal is the destroy fracking etc....when thats done they will boost the price again.
The concept of the business cycle has been known for several millennia:
Genesis 41:29-30, “There will come seven years of great plenty throughout all the land of Egypt,after them there will arise seven years of famine, and all the plenty will be forgotton in Egypt.”
the oil business is cyclic and good companies know this.
This was not cyclic this was straight down.
I hope they were holding on too their britches
May be some cheap equipment on the market come March if prices stay low.
February bond markets should be interesting as well if the oil stays below 50. Stockmarket better hang onto it’s britches
We've been there - done that. Seems like the NY Times wish bad things to happen to fiscally sound Texas. I can picture them drooling over the prospect.
I truly hope that all the Yankees that came out here to suck on the Texas teat....put their tails between their legs and GO HOME. We'll be fine without you. /rant
The company I work for is involved in ND work. In particular, I have been involved in development work (housing and other new infrastructure).
First, the locals point to two previous bust cycles within their lifetimes. So, the boom/busts haven’t been as pronounced or well known nationally, but they have happened there.
Second, the locals have been very reluctant to build too much, too fast. This is why its hard to get a hotel room near the oil patch...and why they have expanded schools with trailers, but resisted large scale projects to expand schools.
In a lot of ways, they are prepared for the bust in ways that Texas isn’t. We’ve worked on a few ‘man camps’...very temporary housing - compare that to all the new apartments in Midland. One of the subdivisions I did work on was unusual - the roads were gravel, and the developer planned on putting in pre-fab homes - so when the day came and the oil workers left, he could buy back the lots, drag the houses off, and return the area to its used as a hay field.
I think ND will weather this as well as Texas.
Also, there’s a differentiating factor which makes this different than previous busts. When a well is fracked, I am told, it does not harm the well or reduce its ultimate production if you let it sit for a year - almost like turning a faucet on and off. So even if a bunch of companies go broke, when all the dust settles, somebody will sill own a well that can be ‘turned back on’ when the price rises again. So the region can almost instantaneously respond to a price increase...no dragging feet to see how long the next boom might last. Almost as good as owning a bunch of oil in a storage tank, and just waiting for the price to go up.
I can only imagine how tough it’s going to get up there, especially all of those high-paying service sector jobs that are about to vanish.
I believe you have false information.
On the Bakken the word I hear is less drilling, more tracking. They are going to refrac the how’s they all ready have
Thanks: your anecdotes are my understanding as well.
I’m sure hoping there was some savings discipline among the guys that caught the boom.. and investment. I’m hoping the glut will dry up in 6 months or so, and prices go to 75bbl, and stay there.
Good info here:
http://www.freerepublic.com/focus/chat/3236160/posts?page=82#82
http://www.freerepublic.com/focus/chat/3233396/posts?page=102#102
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