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Posted (edited)

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.

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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 by horn4life
Posted

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. 

Posted
  On 3/9/2020 at 5:33 PM, 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 

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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.

  • Like 1
Posted

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. 

Posted
  On 3/9/2020 at 5:32 PM, 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. 

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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.

Posted

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! 😉

 

 

Posted
  On 3/9/2020 at 5:54 PM, 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. 

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

  • Like 2
Posted
  On 3/9/2020 at 5:56 PM, 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! 😉

 

 

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

  • Like 1
Posted
  On 3/9/2020 at 5:57 PM, MaybeACoordinator said:

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

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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.

  • Like 1
Posted
  Reveal hidden contents

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

Posted
  On 3/9/2020 at 5:33 PM, 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 

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

  • Like 1
Posted
  On 3/9/2020 at 5:55 PM, 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.

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a big supercomputing center sure does sound good right now

  • Like 2
Posted
  On 3/9/2020 at 5:32 PM, Neonmoon said:

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

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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 

Posted
  On 3/9/2020 at 6:26 PM, 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.

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

Posted
  On 3/9/2020 at 5:55 PM, 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.

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

Posted

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

Posted
  On 3/9/2020 at 5:55 PM, 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.

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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.

 

 

Posted

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. 

Posted
  On 3/9/2020 at 6:46 PM, 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.  

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

Posted
  On 3/9/2020 at 6:46 PM, 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.

 

 

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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. 

Posted

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.

Posted
  On 3/9/2020 at 6:53 PM, Lagunamadre said:

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

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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. 

Posted
  On 3/9/2020 at 7:02 PM, 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? 
Sorry, only Dodge guys are getting furloughed this time around
Posted
  On 3/9/2020 at 5:19 PM, 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. 

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

Posted (edited)

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 by elfenix
Posted
  On 3/9/2020 at 6:00 PM, TwiceHorn said:

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

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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.  

Posted
  On 3/9/2020 at 7:50 PM, 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. 

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

Posted
  On 3/9/2020 at 7:50 PM, 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. 

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Ameros it is!

Posted

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.



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