Looking To The Future Of Oil & Gas
● By Robert Frey
By Amanda Jean Elliot
If the Louisiana economy had a theme song it might be “Don’t Stop Believin’” if you read the recently released report by Dr. Loren C. Scott, Professor Emeritus in Economics at LSU, in the areas of oil and gas. In Acadiana, 2017 will not be the Cinderella year per The Louisiana Economic Outlook report. It won’t be the comeback story many hope and pray for at present. But, it could just be the bridge to a better future for some. If they can hold on.
In the last two years the jobs in Lafayette Parish have plummeted by more than 7 percent. While that may not sound a huge number, it’s cost thousands of jobs and a ripple impact into other parts of the economy. We are, despite recent efforts and successes, still an oil and gas town.
“We are still going through a period of adjusting and will continue to lose jobs into 2017,” Scott says. “We aren’t expecting the prices to go up enough in the Gulf of Mexico for oil and our forecast is based on the price of oil.”
The forecast looks to put oil at $53 a barrel, which isn’t enough of a spark to light a fire that will revive our local economy. The good news is that if firms can hang tough and prices rise as predicted, 2018 may be the light at the end of the dark tunnel.
“It’s lasting so long that it will cause some firms to go belly up because they don’t’ have enough capital to keep stretching it out until the turn around occurs. There’s not a happy story going into 2017,” Scott says. “We are hoping by 2018 oil prices will get around $60 … there may not be growth, but the hemorrhaging could stop in 2018.”
In Lafayette, a move to diversify the local economy has been the buzz for years. And in many ways this has happened. But, Scott says the volume of job outside of oil and gas simply isn’t there to offset the impact of the Hub City’s number one economic factor. The good news? We are a far cry from the last serious oil bust or “v” in the economic pattern.
“There’s no questions it’s helped. But it’s not enough to offset the decline. Lafayette should be applauded on these moves of diversification. The total impact would be much worse without these things, but have are not big enough to totally offset it,” he says.
In addition to a more diverse economy giving us a different picture is also the change in the industry after the last big bust. A lesson well learned that has been beneficial to our current economic state.
“This is not the first dance for Lafayette. It’s not the first time this has happened. If you look at employment for the area you’ll discover these Vs that show up in the annual graph. You go down when energy prices down and you pop back up and that’s not a picture you see anywhere else,” Scott says. “You find that the depth of the Vs is generally becoming more and more shallow. It’s not as deep as it used to be between 1982 and 1987 when you lost 19 percent of your jobs and had a big, big decline and came back again. The one you’re in now, you’ve lost 7.4 percent of the jobs. The energy companies are all running their businesses a lot more efficiently and tightly and they can take a hit without getting totally wiped out because they have learned a lot over the years.”
Scott says the key is the barrel price topping more than $60 a barrel at which point we will begin to enter the upside of the V.
“I taught forecasting for three decades and the second hardest thing to predict is oil prices. This is all if the price of oil does what we hope.”
The first hardest thing to predict, per Scott? The weather. And both could play into what our 2017 look like.
With the recent flooding in the area, Scott says there could be some fall out depending on what happens with rebuilding. About 2,000 home in Lafayette Parish flooded and the vast majority don’t have insurance. He says if those people rebuild many will incur debt. When they go to buy new materials we will see a spike in sale tax revenue. But, come Christmas many of them may spend far less, having a trickle down impact on local retailers. But, like the price of oil, it all remains to be seen.