HOUSTON – (By Michelle Leigh Smith) The current downturn in the Texas oil business and its impact on the state’s economy is not as severe as the 1980s economy crash, economist Ray Perryman told the NAI Partners Texas Economic Outlook event last week.
Houston’s economy is more diversified today and oil is more abundant in the Lone Star State.
“Houston is the center for this hemisphere of the most volatile industries in the world, the oil business,” says Perryman, who earned his Ph.D. in Economics at Rice University. “Houston’s economy is built on the three-legged stool of healthcare and the biosciences, energy, and international trade. One out of every 7 dollars that leaves the United States goes through Texas.”
“What’s different about this downturn is that last time, Texas lost 250,000 jobs and Houston lost 100,000,” he says. This time, there has been a drop in the rig counts and oil prices of just about the same proportion, yet Houston gained 20,000 jobs last year (and about that many this year and Texas is gaining about 160,000-190,000 jobs per year. The period of the recent oil boom was often called the “Texas Miracle” but the real miracle is that the state has kept growing, though not as rapidly, through this process.
“Between 1978 and 1981, the US had two recessions and lost 200,000 jobs; while Texas gained 800,000 jobs. Urban Cowboy was the No. 1 movie and Dallas was the No. 1 television show in the country. We had 1,400 rigs running at that time and no matter how many wells we were drilling, we could not replace what geology was taking away; thus, one major difference in the recent situation and the one in the 1970s is that production was actually increasing.”
Perryman says there is plenty of oil and believes Texas is extremely well positioned.
“In 2010, we were producing 1 million barrels a day,” he says. “Last year, that number was 3.5M barrels a day. “One big difference is oil production has increased. Reserves have increased. We have centuries more reserves – there’s got to be a lot more in the shale.
Last year, the world economy grew by about 3 percent, normally it’s up by 4 or more. Last year, the US grew by about 2%, Europe was flat and Japan was down. Thus, the rest of the world, which is very energy-intensive, had to grow about by 5%. Last week, Saudi Arabia issued bonds in international the international debt markets for the first time ever.
“China is still growing, just not as fast as it was, with demand for oil still increasing by about 3 percent a year,’ he says. Through 2040, the economist estimated the global energy demand to grow by an amount equal to what the entire Western Hemisphere uses now. Meeting that demand will require more fossil fuels.
Perryman has been called the “unofficial state economist” by The New York Times, “the most quoted man in Texas” by Texas Monthly, and “the state’s premiere barbecue connoisseur” by The Dallas Morning News. He married the mayor of Odessa 25 years ago and commutes from the Permian Basin to his office in Waco.
He is a past recipient of the Outstanding Texas Leader Award and has been honored by the Texas Legislature for his “tireless efforts in helping to build a better Texas.”
NAI Partners Managing Partner Jon Silberman introduced Perryman as 170 guests sampled sushi and shrimp Thursday night at the Houston Country Club to hear the economist’s take on the Texas Economic Outlook.
Kinghorn Driver Hough & Co. sponsored the event in the glittering ballroom, festooned with Midnight Red roses, lilies and sunset chrysanthemums.
Nov. 7, 2016 Realty News Report Copyright 2016