Monday, January 26, 2015

Texas and the Price of Gas

Even with lower oil prices, Texas will add more jobs in 2015

Just as we are enjoying low numbers at the gas pump, we are experiencing  job loss because of the lower oil price.  Lower fuel prices help truckers make more money per load but is there a downside to the low price?  We have heard newscasts of personnel cuts at BP and Apache because of the low cost per barrel.  I found this prediction that is quite promising:  Federal Reserve Bank of Dallas Senior Economist and Research Officer, Keith Phillips, projects Texas should add 235,000 to 295,000 new jobs in 2015.  The growth represents about a 2 to 2.5 percent increase in jobs, but lower than 2014 employment growth at about 3.6 percent.

Phillips presented the economic data as part of his Texas Economic Outlook at San Antonio’s Federal Reserve location.  Philips states, “The sharp decline in oil prices has created much uncertainty in our outlook for state job growth this year, but we’re viewing it as a headwind for the Texas economy. However, Texas has a diversified economy, and while the drop in oil prices slows job growth, it won’t send the state into a recession like it did in the 1980s.”
Regions dependent on oil production, such as the Permian Basin and the Eagle Ford Shale, will sharply cut drilling if crude prices continue to trade at $50 a barrel or less, according to Philips. Houston will also experience a drop in oil jobs as well if prices stay at or below $50 a barrel. However, Philips states employment growth will remain positive for 2015.

Goldman Sachs reduced its six-month WTI predictions by half, to $39 a barrel from $75, and for 12 months to $65 from $80 a barrel. Read more…

Goldman suggests the market needs a prolonged lower crude oil price of around $42 a barrel so the market demand and supply can reach an equilibrium.

Moving forward,

Jeff Roach

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