By Sonia Clayton
We often hear the expression, “Everything in Texas is bigger and better.” There is nothing missing from this colloquial expression when it comes to the Lone Star State, a land known for its resources, generosity, southern hospitality, and strong economy. Nevertheless, most oil and gas employers have being impacted by the punishing economic headwinds.
It is an obvious observation that Texas has been responsible for the majority of the employment growth in the country within the last two years. Impressively enough, 1.2 million jobs were generated here. Oil, Gas, and Energy have consistently generated jobs in Texas and the nation for the last eight years and although lower oil prices may help most folks pay their bills in the short run, there is also much pain in low oil prices for the state that generated the most jobs in America in 2014. The oil price collapsed during Q3 and Q4, 2014 and continued through Q1 2015, impacting refinery processing rates, reduced imports, and a flattened domestic crude production as companies decommissioned 60 percent of active drilling rigs.
The domino effect was visible in the Texas economy and negatively impacting manufacturers of steel, construction materials, drilling operators, and many small businesses that depend on them and act as the job generators of this Southern economy. Growth is stagnating in cities such as Houston, San Antonio, Midland, and Odessa. So, the first reality manifested itself in January when the Texas Workforce Commission announced that the Texas jobs machine had slowed down as a result of the impact of lower oil prices. Texas has now moved down to the fourth position in job growth after California, Ohio, and Michigan
In Texas, we had news of layoffs from some of the largest employers in America such as Baker Hughes, Schlumberger, Chevron, BP, and many other oil and gas co-depending enterprises and operations. As of today and through a new panoramic view, oil and gasoline prices seem to be on the rebound comparatively with last month’s activity showing a small recovery reaching a high on Wednesday, April 30th when the international Brent benchmark showed a value of $66.80. However, based on the data provided by the Energy Department of the United States, this figure is still 30 percent below its demonstrated high during the summer of 2014. It also represents an outstanding 40 percent increase compared with the price of March, 2015.
A POSITIVE NOTE
The prognosis is good and points to an optimistic future in American crude prices. Let us keep in mind the words of Lorenzo Simonelli, President and Chief Executive of GE Oil and Gas, when he articulated his perspective, “We think we are going through a natural cycle. There should be an upward trend. With lower investments, over the next six months, supplies are going to be impacted. Demand continues to increase and you’ll see a price that starts to drift upward.”
The optimistic words of Mr. Simonelli have already instilled sector confidence and senior oil executives are now turning wheels and repositioning strategies. Topics such as exploration of oil shale fields of Texas and North Dakota, reinitiating idled rigs, improved profitability, and new economic planning have resurfaced on the negotiation tables.
THE RISK
There are several risk factors in this scenario including:
- Lack of confidence in American political leadership
- Millions of barrels of daily world supplies of crude oil are at risk in Libya and the turmoil in Yemen and the Middle East has put vital sea lanes in jeopardy for oil shipments
- Possible underestimation of American oil production could cause oil prices to dip again
CONCLUSION
In conclusion, Texas and other top-producing oil states have been hurt by a more than 50 percent drop in the price of crude oil since July 2014. In Texas, the oil industry lost 3,400 jobs in January, more than any other industry statewide, according to the Texas Workforce Commission. Economists also reported that the impact of low oil prices was also seen in the 1,100 jobs lost in the “other services” category. However, the losses in the oil industry are cyclical. Texas has experienced the same boom to bust scenario in the past and this time the outlook appears to be for a short bust with a steady recovery. As the oil sector recovers, Texas will once again be the driving force of job growth in the United States and things really will be bigger in Texas.
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Sonia Clayton is the President and CEO of Virtual Intelligence Providers, LLC (VIP). VIP is a single source provider of Project Management, Training, Education, Leadership, Organizational Change Management, Staff Augmentation, Training, Leadership, Technical Consulting Services, and tools to empower businesses and leaders to reach their goals and potential. For more information, visit their website at www.vip-global.com.
