HOUSTON – Layoffs will hit Houston’s energy industry in 2015 as lower oil prices dampen the economy in Houston, which is known as the Energy Capital of the World, according to the Greater Houston Partnership.
West Texas Intermediate broke below $60 a barrel Thursday, closing at $59.95, the lowest level since 2009. In June, the price was above $100 a barrel.
Although Houston will lose energy jobs, it will be gaining jobs in other sectors, said economist Patrick Jankowski at the Partnership’s annual Houston Region Economic Outlook luncheon.
After gaining about 120,000 new jobs in 2014, Houston will add only 62,900 jobs in 2015, Jankowski predicted.
“We’re still going to see growth. But the growth will be slower,” Jankowski said. “We are facing difficult times in the oil patch. But the long term outlook for Houston is strong.”
Jankowski said the sharp drop in oil prices has encouraged some real estate developers to drop plans to start on speculative projects.
Houston is not only headquarters to many energy firms and oil field services firms, but the city has a strong manufacturing presence tied to the oil patch.
With oil prices falling, many energy firms are expected to cut exploration budgets – some as much as 20 to 50 percent, he said.
In 2015, Jankowski said, there will be a 25 percent drop in the rig count (a measurement of how many drilling rigs are operating in America.)
With the advancements in fracking techniques, energy firms have been able to extract oil and gas from oilfields that previously considered low-yield. The Eagle Ford Shale and Permian Basin in West Texas became hotbeds for drilling and economic activity.
Only 5,380 oil wells were drilled in Texas in 2011, but that number doubled in 2012. In 2013, over 19,000 wells were drilled in Texas. So far this year, more than 21,000 wells were drilled in the Lone Star State.
The decline in job growth will impact Houston’s real estate market, which leads the nation in single-family home construction.
The Houston Association of Realtors predicted in a news release Wednesday that home sales will drop 10 to 12 percent over the next year because falling oil prices will dampen job growth. That prediction is based on a forecast by Dr. Ted C. Jones, chief economist of Stewart Title Guaranty. Jones is predicted the city will add 65,000 jobs next year.
Although the energy sector will suffer some setbacks, the Houston region will still have positive job growth overall. Houston has been the nation’s leader in job growth this year, but that’s about to change.
Jankowski is coming off a big miss with his predictions voiced a year ago. Last year, he projected Houston would create only 69,800 jobs in 2014. But Houston has created over 120,000 jobs this year.