While we are all enjoying filling our tanks for gas around $2/gal and lower heating and electrical bills, the sudden drop in crude oil and nat gas process may have negative affects that we will all feel.
The oil and gas development has driven much of the job growth and GDP growth of our economy. But now there are massive layoffs in that field of work. Texas alone will see 100,000 jobs disappear. And these are very well paying jobs. Even lower skilled workers on oil and gas rigs started at $70,000/yr and quickly went to $90,000/yr and higher. Experienced, skilled workers were getting $115,000 and up. Further, since these jobs were in the field in remote areas far from home, they also got food and lodging per diems on top of their wages which boosted local economies. They also paid a lot of taxes and used a lot of local services.
Now drilling rigs are less than half a yr ago and many crews are laid off. Hotels and restaurants in the major drilling areas of Pa are reporting a 30% drop in business and they are also laying of people. Suppliers, truckers, heavy equipment operators are all losing their jobs. Ones still working are getting pay cuts as competition for fewer jobs heats up. But it doesn't stop there.
A lot of related business is also going away. The law firm called Burleson LLP just announced it was closing eight different offices. Almost every law firm in oil patches added people to handle leasing, wills, trusts, ROW issues, and more and are now cutting back people. Title companies, financial services, banks all added people to handle increased demand that no longer see that demand. Many oil companies are closing offices, Shell just closed its office near Pittsburgh laying off 150 people, many that were in the $200,000 range. This has been repeated by hundreds of companies across the the state and the country.
Many of these people bough homes, new vehicles, took expensive vacations. Will they lose their homes? Lose their SUVs? Quit spending money? How will this ripple down the economy? With an expected loss of 300,00 direct jobs and an unknown number of related jobs, what will the total affect be?
But there is an even more pressing related issue. At least two dozen companies are close to going bankrupt because of the heavy debt, usually several billion each, they acquired to grow reserves. If they go under, major banks, hedge funds, private investors and more may be buried in that avalanche. It was a previous crash in crude oil that sparked the Savings and Loan crisis of the 1980s. Even pension funds and unions are heavily invested in the oil biz.
Maybe the cheap gas will stimulate other economic activity to balance the loss of the oil patch dynamics. Maybe the econ will actually be better off. But maybe not.
The oil and gas development has driven much of the job growth and GDP growth of our economy. But now there are massive layoffs in that field of work. Texas alone will see 100,000 jobs disappear. And these are very well paying jobs. Even lower skilled workers on oil and gas rigs started at $70,000/yr and quickly went to $90,000/yr and higher. Experienced, skilled workers were getting $115,000 and up. Further, since these jobs were in the field in remote areas far from home, they also got food and lodging per diems on top of their wages which boosted local economies. They also paid a lot of taxes and used a lot of local services.
Now drilling rigs are less than half a yr ago and many crews are laid off. Hotels and restaurants in the major drilling areas of Pa are reporting a 30% drop in business and they are also laying of people. Suppliers, truckers, heavy equipment operators are all losing their jobs. Ones still working are getting pay cuts as competition for fewer jobs heats up. But it doesn't stop there.
A lot of related business is also going away. The law firm called Burleson LLP just announced it was closing eight different offices. Almost every law firm in oil patches added people to handle leasing, wills, trusts, ROW issues, and more and are now cutting back people. Title companies, financial services, banks all added people to handle increased demand that no longer see that demand. Many oil companies are closing offices, Shell just closed its office near Pittsburgh laying off 150 people, many that were in the $200,000 range. This has been repeated by hundreds of companies across the the state and the country.
Many of these people bough homes, new vehicles, took expensive vacations. Will they lose their homes? Lose their SUVs? Quit spending money? How will this ripple down the economy? With an expected loss of 300,00 direct jobs and an unknown number of related jobs, what will the total affect be?
But there is an even more pressing related issue. At least two dozen companies are close to going bankrupt because of the heavy debt, usually several billion each, they acquired to grow reserves. If they go under, major banks, hedge funds, private investors and more may be buried in that avalanche. It was a previous crash in crude oil that sparked the Savings and Loan crisis of the 1980s. Even pension funds and unions are heavily invested in the oil biz.
Maybe the cheap gas will stimulate other economic activity to balance the loss of the oil patch dynamics. Maybe the econ will actually be better off. But maybe not.
