Houston... we have a problem... with Oil Prices.

[horn4life 3755]

I thought about putting this under the "economy thread" from last year but the pressure on oil prices make Houston unique in the potential effect.  And it's not going to be good. The only other economy that might be impacted as much by oil prices will be Louisiana. 

Now I'm an old fart and I had just come up to UT in '79 and saw the collapse of the oil industry and the devastation that the oil downturn took upon the town.  Many of the people we had know from Church and other activities lost their jobs because they were the older better compensated people at the oil and gas companies, my father included.  With Russia and Saudi Arabia now going to simply pump all the oil they can trying to keep their economies afloat, oil is now officially in the shitter.  Malls had no foot traffic and the cascade of lack of disposable income made a once vibrant city a ghost town.

Parsley energy here in Austin mainly a shale player had their stock open down 50% this morning. Shell's off another 15% on top of last weeks losses and shale oil today is now more expensive to produce than to sell.  It's been great for the Texas economy growing oil and gas production, but the moves in the oil industry alone are extremely concerning.  Add in the likely world wide reduction in need for oil and bloating supply as a result means downward pressures on price is not near the bottom yet.  I bought and flipped a house in Corpus last year (world's slowest flip, with the most fishing for me in my lifetime) and I have been looking hard at buying another one.  Today I just put the brakes on that, wanting to see what shakes out.  Lots of worker bee oil and gas money in Corpus still, but I think a lot of those jobs are now doomed to disappear on OPEC's actions alone.

We are in a strange way about to be the victims of our own success.  Putting downward pressure on oil prices with less regulation, and increasing in production has made us the largest producer in the world.  Unfortunately our gains were made using new technologies and drilling techniques, to reach oil that was previously unprofitable to recover.  So the dip in prices wipes all all profitability, on shale production in the state. I am very afraid that Houston is going to get pounded this downturn.  Factor in the added stresses on the industry and the city of coronavirus.

The 1980's oil bust left lasting mark on Houston . 2016 article on the downturn

Quote

The colossal fall in oil prices that began in 1982 and accelerated in 1986 not only sapped Houston's wildcatter spirit, but undermined Houston's economic foundations. Houston lost more than 225,000 jobs, about one in eight, and unemployment rate climbed above 9 percent - nearly double today's rate. Office vacancies soared above 20 percent. Office rents plunged.

Loan payments to banks soon followed. Risky commercial real estate and energy loans went bad and hundreds of banks failed. Construction ground to a halt. More than 200,000 homes stood vacant.

I am really worried for my old hometown.  Houston has diversified, but oil and gas is still the life'd blood of the city. With no pressure in sight that might push prices up (unless a war starts) not sure where the bottom will be for oil. Nervous for Texas this go round.  We largely avoided the real pain of the last recession. Think we might get a real whammy this go round.

Why Saudi Arabia has started a Global crude oil price war  Just more info on part of the political why behind the collapse of oil prices.

Edited March 9, 2020 by horn4life

[Anastasis 23395]

Can you post the content of that link under spoiler tags?

 

In the meantime, I propose that we halt all arms sales to SA. 

[Judge Roybeanbag 11810]

1 minute ago, Anastasis said:

In the meantime, I propose that we halt all arms sales to SA. 

C'mon, man.  How is San Antonio gonna defend itself?

[Anastasis 23395]

3 minutes ago, Judge Roybeanbag said:

C'mon, man.  How is San Antonio gonna defend itself?

With the rapid deployment capable refried beans defense shield. 

[Francisco 2.0 32334]

6 minutes ago, Anastasis said:

Can you post the content of that link under spoiler tags?

 

In the meantime, I propose that we halt all arms sales to SA. 

 

[Anastasis 23395]

[Neonmoon 38127]

Houston industry has “allegedly” diversified since the 80s crash. It won’t be smooth sailing but it won’t be Detroit. 

Midland is fucked. North Dakota is fucked. 

[FORTY NINE TO ZERO 2630]

One of my pet peeves is people using “Houston we have a problem” constantly whenever something remotely bad happens to Houston.  It’s tired and worn out 

[Brisketexan 104609]

1 minute ago, Xian said:

One of my pet peeves is people using “Houston we have a problem” constantly whenever something remotely bad happens to Houston.  It’s tired and worn out 

So, would you say that you.....have a problem with people using that cliche?

Also, I haven't even talked to them yet, but I suspect that my Texas bankruptcy lawyer friends are drinking lots of Gatorade and eating their Wheaties to get ready for the avalanche of BR work that will be coming their way right soon.  Under $30 oil for a sustained period is going to kill a lot of enterprises.

[Horn Under a Bad Sign 20344]

With a combination of massive supply overhang and a significant reduction in demand at the same time,  this situation is unequaled in oil market history.  The shale sector is getting killed. Billions of dollars in equity wiped out. 


Houston Chronicle: Shale drillers are staring down the barrel of the worst oil bust yet:

https://www.chron.com/business/energy/article/Shale-Drillers-Are-Staring-Down-the-Barrel-of-15116280.php?cmpid=ffcp&fbclid=IwAR0B8vz6N92glXWD-e_RraKpoTgt6PU0SlSce4uc7Powkxo2X3Bed4Pus4s

 

In some ways it's probably a good thing that Biden appears to be the Democrat nominee because Bernie's fracking ban proposal would have cost the Dems the White House. 

[MaybeACoordinator 8349]

20 minutes ago, Neonmoon said:

Houston industry has “allegedly” diversified since the 80s crash. It won’t be smooth sailing but it won’t be Detroit. 

Midland is fucked. North Dakota is fucked. 

We'll see how much Houston has diversified. Whenever I press people on that it doesn't generate much in the way of examples. Yes, we are a bit more of a container port now, and the Med Center is a bigger player than it was in the '80s, but I am hard pressed to think of much else we've done in the way of diversifying.

[horn4life 3755]

I am praying that we reach out to the Saudi's and they pull back. I mean embracing murder and dismemberment has to have some advantages? And what President has ever been better buddies with Putin.  So there's a remote chance of help from our government here?

IF not Houston... we have a problem! 😉

 

 

[Loco 3752]

29 minutes ago, Anastasis said:

he has to order off the picture menu? smh

[MaybeACoordinator 8349]

1 minute ago, Horn Under a Bad Sign said:

With a combination of massive supply overhang and a significant reduction in demand at the same time,  this situation is unequaled in oil market history.  The shale sector is getting killed. Billions of dollars in equity wiped out. 


Houston Chronicle: Shale drillers are staring down the barrel of the worst oil bust yet:

https://www.chron.com/business/energy/article/Shale-Drillers-Are-Staring-Down-the-Barrel-of-15116280.php?cmpid=ffcp&fbclid=IwAR0B8vz6N92glXWD-e_RraKpoTgt6PU0SlSce4uc7Powkxo2X3Bed4Pus4s

 

In some ways it's probably a good thing that Biden appears to be the Democrat nominee because Bernie's fracking ban proposal would have cost the Dems the White House. 

Seems to me that under present conditions banning fracking is about as relevant as banning the manufacture of whaling harpoons. 

[Horn Under a Bad Sign 20344]

Just now, horn4life said:

I am praying that we reach out to the Saudi's and they pull back. I mean embracing murder and dismemberment has to have some advantages? And what President has ever been better buddies with Putin.  So there's a remote chance of help from our government here?

IF not Houston... we have a problem! 😉

 

 

Neither Putin nor Saudis give a fuck about Trump or Jared except in terms of how they can be played to Saudi advantage. 

[TwiceHorn 31273]

2 minutes ago, Horn Under a Bad Sign said:

Neither Putin nor Saudis give a fuck about Trump or Jared except in terms of how they can be played to Saudi advantage. 

They may realize that crashing our economy is going to put their finger puppet out of office, though.

[Horn Under a Bad Sign 20344]

3 minutes ago, MaybeACoordinator said:

Seems to me that under present conditions banning fracking is about as relevant as banning the manufacture of whaling harpoons. 

True. I should have posted that comment in the "Dem candidates for President"  thread.

Trump's good friend Mohammed bin Salman wants to crush Midland/Odessa for eternity and yet the folks out there love Trump.

[horn4life 3755]

Spoiler

As the 1980s got underway, Houston's oil industry was in the midst of nearly a decade of opulence, supported by record crude prices that followed the Arab oil embargo of 1973 and the Iranian Revolution of 1979.

Sleek company cars plied the streets of the city. Membership at tony golf clubs soared. Corporate jets stood at the ready to whisk executives to anywhere in the world.

But just a few years later, it all came crashing down with the price of oil. The jets were grounded, cranes dismantled and commercial projects scrapped. Thousands of workers lost jobs and scores of companies went belly up.

"It wasn't much fun," said Patrick Fairchild, a geologist based in West Texas, whose Midland oil company went bankrupt when struggling lenders called his loan in 1986 - even though he was still making payments.

 

As Houston struggles through the latest oil bust, the 1980s crash remains the downturn against which all others are measured, an epic collapse that forced the region to confront its dependence on a single industry and begin a long process to diversify its economic base. Students of history can argue about which oil bust hit Houston's energy sector harder, but there's little debate that the 1980s collapse did far more damage to the local economy.

The colossal fall in oil prices that began in 1982 and accelerated in 1986 not only sapped Houston's wildcatter spirit, but undermined Houston's economic foundations. Houston lost more than 225,000 jobs, about one in eight, and unemployment rate climbed above 9 percent - nearly double today's rate. Office vacancies soared above 20 percent. Office rents plunged.

 

Loan payments to banks soon followed. Risky commercial real estate and energy loans went bad and hundreds of banks failed. Construction ground to a halt. More than 200,000 homes stood vacant.

"I remember seeing apartment projects started and not completed, new office buildings just sitting vacant, residential areas where streets got put in but never completed," said Keith Miller, senior energy lender at Mutual of Omaha Bank. "It was a low time for the Houston economy."

After the shock of the 1973 Arab oil embargo, crude prices stayed high as the newly formed Organization of Petroleum Exporting Countries controlled production to keep supplies tight. Imported oil prices averaged at a peak $39 a barrel - or more than $106 in 2016 dollars - in the summer of 1981, according to the Energy Information Administration.

But prices began falling in March 1982 amid a decline in oil demand as the United States limped through a recession and Europe and other nations slowed economically, in part because of expensive fuel prices. From January to June 1986, crude prices fell 52 percent, or to about $27 a barrel in 2016 dollars. The price drop accelerated as Saudi Arabia pushed its crude production higher.

The nation's rig count fell from a peak of more than 4,500 in late 1981 to a low of 663 in July 1986. Sales of oil field equipment plunged from $40 billion to $9 billion over the same period, according to the Federal Reserve Bank of Dallas.

Drilling rigs were torn apart and sold for scrap, at pennies on the dollar. For people trying to figure out how much the machines were worth, the first question wasn't "How much oil can it drill up?" It was "How much does it weigh?"

Attendance plummeted at the Offshore Technology Conference, one of the energy industry's biggest events. More than 100,000 people had packed the trade show in 1982; two years later, organizers had the conference without an exhibition because so few people would attend. By 1987, OTC attendance reached only 25,000, just one-fourth of what it was five years earlier.

A Wall Street Journal article claimed the most exotic dish served at one Houston dinner party was a plate of cheese balls. The New York Times wrote about a Houston dentist who reported an increase in teeth-grinding problems among the locals.

In the boom years, "you got a free car and all the gas you could put in it," said Mark Parrish, who worked for an independent oil company in the 1980s. "That was the first thing that went away. It was a pretty big hit."

Bigger hits followed. In oil towns like Midland, laid-off oil workers lived in tents, recalled Fairchild, the geologist. One lived in the cardboard box his refrigerator had come in.

Houses were just being evacuated," Fairchild said. "It was a crazy time."

In many ways, the oil industry felt the repercussions of this epic oil bust for years. A generation of young petroleum engineers, for example, left the industry and never returned, leaving oil companies to grapple with a middle-age talent gap that persisted even into the recent oil boom.

The searing experience also provided a lesson that political, business and civic leaders took to heart: The region's economy could not depend so heavily on one industry. Efforts to diversify the local economy got underway, and today, sectors like the large and growing health care industry are tempering the impact of the latest oil bust.

Banking in the region has changed, as well. The arrival of interstate banking in 1987 allowed out-of-state institutions to snap up troubled Houston banks, and helped stabilize the local financial system. Most of the region's banking is done by large national lenders, rather than scattered, small independent banks, providing greater access to credit and capital.

The oil and gas industry has again been battered, this time by a slide in prices that began in the summer of 2014. More than 170 North American oil producers and oil field services companies, many in Texas, have gone bankrupt, according to Dallas law firm Haynes & Boone. Tens of thousands of oil and gas jobs have been lost. Many companies continue to struggle under the weight of some $500 billion in high-interest debt that independent firms ran up during the latest boom.

The broader economy, so far, has held up much better than 30 years ago. The Houston area is still adding jobs, albeit barely. The real estate market is cooling, but not collapsing. Sectors such as health care and petrochemicals are still growing.

In an interview in 1989, the University of Houston economist Barton Smith said the oil boom of the 1970s and early '80s caught the city by surprise, and it perhaps grew too far, too fast, which intensified the bust.

"But we've learned a lesson," he told the Houston Chronicle. "All we need to do is remember it."

 

 

some pretty dark times that I am sure a lot of folks don't remember.  

[workswithseed 2036]

40 minutes ago, Anastasis said:

With the rapid deployment capable refried beans defense shield. 

So with farts? I think that'll work.

[elfenix 34171]

36 minutes ago, Xian said:

One of my pet peeves is people using “Houston we have a problem” constantly whenever something remotely bad happens to Houston.  It’s tired and worn out 

it's not even the quote from the actual mission, it's the dramatized one from the movie.

[elfenix 34171]

16 minutes ago, MaybeACoordinator said:

We'll see how much Houston has diversified. Whenever I press people on that it doesn't generate much in the way of examples. Yes, we are a bit more of a container port now, and the Med Center is a bigger player than it was in the '80s, but I am hard pressed to think of much else we've done in the way of diversifying.

a big supercomputing center sure does sound good right now

[tx 3 putt 76372]

38 minutes ago, Neonmoon said:

Houston industry has “allegedly” diversified since the 80s crash. It won’t be smooth sailing but it won’t be Detroit. 

Correct, the Houston economy is not only o/g, it’s also all this o/g people spending large amounts of money all over town 

sugar babies better be very very worried

2019 bonuses hit in a couple of weeks, so praise baby Jesus 

[tx 3 putt 76372]

40 minutes ago, Neonmoon said:

Midland is fucked.

Maybe Aramco decides to buy into US Shale ???

[David Dennison 18656]

What's bad for Houston is bad for Texas.

[Hiphopopotamos 20865]

2 minutes ago, David Dennison said:

What's bad for Houston is bad for Texas.

 

[Zonahorn 8079]

9 minutes ago, longhornmatt said:

This will hit pretty hard everywhere in Texas once all the ripple effects are felt.   Midland/Odessa worst, then Houston, but it’s still going to suck for a lot of people in Dallas, too.   Even Austin isn’t really insulated from the oil sector truly crashing.

Hopefully this will reverse when coronavirus concerns ease and economic activity ramps back up.  But if that’s not enough to boost demand to sufficient levels, and if the Saudis are just planning to keep low prices for a few years regardless, then it’s going to get really, really ugly.  

The industry has been pretty stagnant for 5 years as it is, and I’m actually surprised more companies haven’t gone under since the big price dip at the end of 2014.  PE and even traditional lenders have already largely cut off the energy industry for about a year before all this started.    The sector needed an uptick, not a cooling off period.   

Might be a lot of people moving out of Texas for a couple of years.

Shale oil has played a big role in keeping the industry afloat.

[Grade of D as in David 13253]

48 minutes ago, MaybeACoordinator said:

We'll see how much Houston has diversified. Whenever I press people on that it doesn't generate much in the way of examples. Yes, we are a bit more of a container port now, and the Med Center is a bigger player than it was in the '80s, but I am hard pressed to think of much else we've done in the way of diversifying.

Unless Chili's and Best Buy's count as diversified, then I agree

[Guest Lobo]

I'm gonna ask my inside guy at Parsley, junior associate analyst.  He sees everything going on there, he'll know what's what.  

[gmr548 16512]

45 minutes ago, MaybeACoordinator said:

We'll see how much Houston has diversified. Whenever I press people on that it doesn't generate much in the way of examples. Yes, we are a bit more of a container port now, and the Med Center is a bigger player than it was in the '80s, but I am hard pressed to think of much else we've done in the way of diversifying.

It's a little disingenuous to just dismiss healthcare. Houston is a global medical and biotech hub now. NAFTA didn't even exist in the 80's and trade/logistics has also grown significantly. The city isn't immune to an oil bust, obviously, but it's at least not a total one-trick pony now.

 

 

[horn4life 3755]

I guess on the bright side I haven't bought a new truck yet and there is going to be some opportunity in that department if I go used.  I was talking to an old guy that did storage units and we both talked about the stupidity of so many of the workers in Oil and Gas regarding the handling of money.  Hotshotters and others buying the most loaded trucks available, maybe even having a boat, but not owning a home?  And buying rounds having a blast!

My SIL is at Shell and he and my daughter are moving to Louisiana as we speak. So my awareness my be heightened, but even without the virus this would be very bad. With the virus? Who knows. 

[Lagunamadre 1975]

5 minutes ago, Lobo said:

I'm gonna ask my inside guy at Parsley, junior associate analyst.  He sees everything going on there, he'll know what's what.  

I'm guessing they are second guessing their Double Eagle acquisition. 

[MaybeACoordinator 8349]

6 minutes ago, gmr548 said:

It's a little disingenuous to just dismiss healthcare. Houston is a global medical and biotech hub now. NAFTA didn't even exist in the 80's and trade/logistics has also grown significantly. The city isn't immune to an oil bust, obviously, but it's at least not a total one-trick pony now.

 

 

I'm not dismissing healthcare at all -- I am just saying it's not up much over what it was in the '80s, as it was already a huge driver of the economy even then. 

[jimmyjazz 45557]

Since when has Trump given a damn about Texas O&G people?  He's always crowing about lower prices for gas and refined goods whenever the price of oil takes a shit.

It's kinda weird given that Texas is a red state, but maybe just a bit too close to blue for him to care?

I don't think he'll reach out to Saudi at all.

[Hank Scorpio 17723]

I’m in the market for an extremely expensive and lightly used F150 that’s 2-3 years old. Does anyone know where I might find one in the Houston area? 

[Guest Lobo]

8 minutes ago, Lagunamadre said:

I'm guessing they are second guessing their Double Eagle acquisition. 

Probably.  And I was being hyperbolic, a junior associate analyst wouldn't dare open their mouths to a non-employee at time like this.  

I'm guessing the change in leadership may have a material change on the approach to the then-acquired asset. 

[TwiceHorn 31273]

Dallas is gonna blow its o-ring out on real estate again.

[elfenix 34171]

I’m in the market for an extremely expensive and lightly used F150 that’s 2-3 years old. Does anyone know where I might find one in the Houston area? 

Sorry, only Dodge guys are getting furloughed this time around

[huge 3788]

I saw F450 Dually at the Rodeo.  Seemed value priced at $92.5

[Continental Op 3934]

2 hours ago, Anastasis said:

Can you post the content of that link under spoiler tags?

 

In the meantime, I propose that we halt all arms sales to SA. 

Well then you piss off all the Lockheed Martin Missile and Fire Control and Raytheon folks in Dallas!  

[elfenix 34171]

wouldn't it be nice if this state could figure out how to have an energy/industrial base that doesn't go tits up any time the saudis decide to open the spigots?  45 years since the oil crises started and we still haven't pulled our heads out of our asses. 

Edited March 9, 2020 by elfenix

[tx 3 putt 76372]

2 hours ago, horn4life said:

I guess on the bright side I haven't bought a new truck yet

I just bought a huge truck dec 30, full of shit I don’t need. So hits close to home !

[tx 3 putt 76372]

1 hour ago, Hank Scorpio said:

I’m in the market for an extremely expensive and lightly used F150 that’s 2-3 years old. Does anyone know where I might find one in the Houston area? 

Pm sent !!!!

[pyrohornIII 4809]

3 hours ago, TwiceHorn said:

They may realize that crashing our economy is going to put their finger puppet out of office, though.

They achieved their play here by using Trump to neuter us to the rest of the world.    Exposing him for the fraud he is would serve Putin's goals more than propping him up now.  

[fattyflattie 4636]

3 hours ago, Hank Scorpio said:

I’m in the market for an extremely expensive and lightly used F150 that’s 2-3 years old. Does anyone know where I might find one in the Houston area? 

150?  Montrose maybe?

[Alien Octopus 499]

7 hours ago, tx 3 putt said:

Maybe Aramco decides to buy into US Shale ???

They will have to outbid Chevron and Exxon

[Alien Octopus 499]

6 hours ago, elfenix said:

wouldn't it be nice if this state could figure out how to have an energy/industrial base that doesn't go tits up any time the saudis decide to open the spigots?  45 years since the oil crises started and we still haven't pulled our heads out of our asses. 

They did just fine in 15 and 16 when the Saudis tried to kill fracking. Doubt it will be different this time.

[Macanudo 12926]

6 hours ago, elfenix said:

wouldn't it be nice if this state could figure out how to have an energy/industrial base that doesn't go tits up any time the saudis decide to open the spigots?  45 years since the oil crises started and we still haven't pulled our heads out of our asses. 

Ameros it is!

[Message Board User 12389]

https://www.texastribune.org/2020/03/09/how-will-oil-price-collapse-impact-texas/

When oil production slows in Texas, employment and tax revenues decline, and budget cuts at the state and local levels often follow. (Craymer has estimated that the state loses $85 million per year for every $1 decrease in oil prices.)

Texas Comptroller Glenn Hegar, the state’s chief revenue estimator, predicted last year that oil prices would hover in the low- to mid-$50-per-barrel range through the latter half of 2021. The price of West Texas Intermediate crude was hovering just over $30 per barrel at midday Monday.

Hegar tempered any economic panic Monday, saying that “the fundamentals of the Texas economy remain strong” but adding that he will be closely monitoring the situation.