Written by Scott Carpenter
Bill Gilmer knows an economic bust when he sees one.
In the 1980s, when oil prices tumbled amid a supply glut, Gilmer watched as Houston’s office space cleared out and stayed out. “If you live in Houston, you know a speculative bust when you see one,” said Gilmer, the director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business. “Those jobs never came back.”
But when Gilmer surveys Houston’s oil and gas-driven economy these days, he doesn’t see a bust. He sees an industry that’s poised to roar back to life as soon as demand returns and inventories clear.
“This is not a hard industry to reopen,” he said.
Comprising 6% of the U.S. workforce, America’s oil and gas industry is not a pretty picture right now. The price of a barrel of West Texas Intermediate (WTI) crude has tumbled from $50 in February to barely $20 today, battered by nationwide stay-at-home policies that have drastically undercut demand for transportation fuels. Official unemployment in the sector has ballooned to 10.2% and likely has further to climb. Earlier today major U.S. shale pioneer Chesapeake Energy CHK said it was exploring the possibility of bankruptcy, part of a growing number of firms that are crashing out hard.
To top it off, some commentators say that the world’s demand for oil will be permanently lower as telecommuting catches on.
But in America’s oil and gas heartland in Texas and neighboring states, economists who study the sector say that the pain won’t last as long as in previous industry downturns. They argue that the dozens of small companies fueling America’s fracking boom, toughened by a credit crunch last year, are ready to pivot back into high gear as soon as demand recovers. And new data showing that people are beginning to take their cars back out on roads hints that a demand recovery could well be in the works.
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