Texas is heading for a bad-news, good-news economic cycle.
The bad? The price of oil is going to continue falling, making it difficult for producers to keep drilling for the crude.
The good? Texas is better positioned this time to handle this bust compared to its history with these crazy economic cycles.
CNBC.com reports: “In some ways, the Texas oil industry today is a victim of its own success. After a steady output decline in the 1980s and ’90s, U.S. oil producers staged a remarkable and widely unexpected revival over the past decade by deploying new seismic and drilling technologies. By coaxing drill bits to move horizontally, and breaking up ‘tight’ oil formations with fracking, millions of barrels of oil have been produced from decades-old fields once left for dead.”
So, the world now has a glut of oil, thanks to tremendous increases in production here at home.
I arrived in Texas in the spring of 1984 to begin work at a newspaper in the Golden Triangle, one of the world’s premier petrochemical producing regions. Life was good in Beaumont, Port Arthur and Orange.
Then the bottom fell out. Two years later, the price of oil had collapsed. Refineries and petrochemical plants laid off thousands of employees. Some operations shut down. The jobless rate zoomed to nearly 20 percent in that part of the state.
Life, quite suddenly, became not so good.
The mantra then became “economic diversification.” Texas had to branch out, seek other economic revenue streams to take the pressure off the oil and petrochemical industry.
So, the state did that. It invested in high-tech, medical research, automobile manufacturing and a lot of other smaller initiatives.
That 1980s oil bust hammered the Texas Panhandle, too, where I would move in early 1995.
And, yes, in this part of the state we’re faring relatively well. We, too, have diversified. We aren’t nearly as dependent on oil and natural gas as we’d been since, oh, the Spindletop gusher came in at the turn of the 20th century.
Has the state been hit hard by the steep drop in oil prices? Yes. CNBC reports that the gross state product has been reduced to near zero as the year draws to a close. State government is looking at a serious revenue shortfall that the Legislature will have to deal with when it convenes in January 2017.
There isn’t the sense of panic, though, that we felt in the 1980s.
Why? Much of the state has heeded the diversification warnings our leaders sounded the last time the bottom fell out.