Sept. 30–A Louisiana economist’s latest forecast for the Houma-Thibodaux area offers a glimmer of hope to a community hit hard by a four-year offshore oil bust.
Put simply, Loren Scott’s report, the subject of a story on today’s front page, says the area has hit bottom and has started the “long road back.”
Scott makes no statements about if or when the area might return to the boom times it saw before global crude prices plunged in 2014, taking thousands of local jobs with them. But his report offers evidence that the economy is on the mend and predicts a gain of 700 jobs next year and 2,100 the following.
“The numbers obviously do not show great growth,” the report says, “but at least they are up.”
Here are a few of my own random observations based on Scott’s latest forecast:
SAME OLD …
“Diversify” was the catchphrase among politicians, business people and many residents after the local oilfield economy tanked during the bust of the late 1980s. And “diversify” is the catchphrase again as the local oilfield economy reels from months of persistently low crude prices.
Despite pledges, ours remains a one-horse community. Scott’s report cites a few examples of companies diversifying their work to become less dependent on oil’s boom-or-bust cycles. But it also makes clear that one thing will determine the speed and degree of any local rebound: oil prices.
“It is a tough situation when an economy is tied so closely to a commodity and that commodity’s price fluctuates in a most unpredictable way,” the report says.
OUT OF OUR CONTROL
Scott predicts oil will rise from an average $65 a barrel this year to $80 a barrel by 2020. Analysts have long cited $60 a barrel as the break-even price for most deepwater projects in the Gulf of Mexico, though companies are pushing the price lower through innovation and efficiency. In any case, a stable, $80 price could increase companies’ interest in drilling in the Gulf.
It’s notoriously difficult to predict long-term crude prices because so many variables affect them, something Scott acknowledges in his report.
War or rebellion in the Middle East, decisions in Washington, climate change and nations’ response to it, the gradual switch from oil to alternative energy sources, a U.S. shale drilling boom, technological change and innovation, OPEC production levels, demand for oil and gas in countries lots of people have never heard of, a colder-than-expected winter in the northeast — these issues and others have a great bearing on how many people hold jobs locally, how much they will pay and how long they will last.
Local CEOs have little or no control over the macro issues that decide the industry’s fate. Neither do local politicians. Or local workers.
So local jobs, despite conventional wisdom, are often decided by people and trends few locals would describe as local.
DIFFERENCE OF OPINION
Scott’s forecast, though well regarded, is one economist’s interpretation of how a lot of complex factors will work to influence the area’s economy.
David Dismukes, executive director of LSU’s Center for Energy Studies, told The Courier and Daily Comet in Saturday’s annual Oil and Industry section that he foresees the industry rebounding somewhat but still expects it to lag behind historic standards.
He suggested any rebound will be tempered, in part, by burgeoning production in inland shale fields, which helped make the U.S. the world’s top oil producer this month for the first time since 1973. Drilling there is quicker, and the break-even price is lower.
“The Houma economy is tied very closely with offshore oil and gas activity, and, unfortunately, that is not, and likely will not, be a basin of particular interest to a large number of oil and gas companies,” Dismukes said. “Most are continuing to exploit the onshore unconventional resources around the U.S. and will increasingly be looking for opportunities abroad. While some activity will likely pick up, primarily activity in the deepwater Gulf of Mexico, it’s not likely to be enough to bring back the robust periods of activity we have seen in the past.”
His bottom line sounds similar to Scott’s — just a little more cautious.
— Executive Editor Keith Magill can be reached at 857-2201 or firstname.lastname@example.org.
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