It's hard to believe that once upon a time, the wise sages of energy were saying that Texas would never see another oil boom and the United States as a whole would run out of oil sooner rather than later. Well, those sages were wrong because not only has there been a boom, we now might just be in the midst of a pretty epic bust. Maybe.
Things seem relatively quiet within the oil industry right now, but the odds are good that with prices still hovering in the $40s, the calm won't last long. Low oil prices have been hitting Houston since January with announced layoffs paired up with a general unease in the air. Home sales have fallen for the first time in years, and some are saying that there won't be enough people coming in to rent the apartments that have been sprouting up across the city.
"There's a lot of whistling past the graveyard in Houston real estate right now, but by the third quarter this year, everyone is going to be convinced the end of the world has come," Bill Gilmer, Director of the Institute for Regional Forecasting in the University of Houston Bauer College of Business, says. "Right about then, we'll be stunned by how far the price has fallen and asking why we haven't diversified like we thought we had. About that time when we feel absolutely the worst, the turn will come."
The low oil prices have already been translating into tough times for people who work in the white-collar side of the oil industry. Layoffs started with the service companies, but almost every energy company will be cutting people from its payroll as the low oil prices continue. "It's a complicated story right now. First of all, we are going to get hit and we're going to get hit hard by the declining oil prices. If that was all that was going on, we'd have a mild recession on our hands and lose maybe 65,000 to 70,000 jobs. But that's not all that's going on, so it's not that simple," Gilmer says.
It's hard to say as of right now how many job losses that will ultimately amount to, but Gilmer points out that the loss of white-collar jobs translates to at least four other jobs connected to that one paycheck. People with these jobs are making $140,000 a year, about double what the average person is making, so these jobs are indirectly supporting about four other jobs outside of the industry entirely -- the people that these people hire. Once that job is gone, it will have a ripple effect on the other people indirectly connected, he says.