Besides the fall in oil prices to approximately $50 dollars a barrel, other signs point to a decline in the Texas oil industry. Recently published employment figures show the number of persons employed in the state’s oil and gas extraction industry has declined for three consecutive months, registering a much bigger decline in January (Figure 1).
The last time this happened was early in 2009 when the global economy was in the midst of the Great Recession. This time around the U.S. economy is not suffering a recession, but various indicators are signaling a possible downturn in the oil industry. The number of operating rigs in the state fell to 599 in the month of February (Figure 2).
Rigs are a good indicator of oil industry activity because when the number of rigs increases, so does demand for other industry services, generating positive job growth in the process. This is nothing new for the Texas economy, which has weathered other periods of falling oil prices, including in the 1980s and the Great Recession of 2008–09. This year many oil companies bought insurance against falling oil prices and are weathering the downturn by eliminating extra work hours, implementing hiring freezes, and asking their service providers for discounted prices. The level of contraction in the Texas oil industry will depend on how long oil prices will hover around $50 a barrel and if oil prices continue to fall. Fortunately, the U.S. economy continues to grow, allowing the Texas economy to balance out the downturn in the state’s oil industry.
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