HOUSTON – Falling oil prices are going to sap some of the momentum out of the Houston economy, particularly if oil remains below $75 a barrel in 2015, says Dr. Bill Gilmer, economist with the University of Houston’s Institute of Regional Forecasting.
If West Texas Intermediate spends a lot of time below $75, Houston job growth could fall to 58,300 new jobs in 2015, Gilmer said at the institute’s Fall Symposium Thursday.
But if oil prices are in the $80 to $90 a barrel range next year, Houston’s economy will add 76,500 jobs next year. On Friday morning, the WTI price of oil was over $76 a barrel.
“A lot of this depends on the price of oil,” Gilmer said. “And no one can predict the price of oil.”
If Gilmer’s forecast is accurate, it would represent a sharp drop from what has happened in the Houston economy this year. Over the last 12 months, Houston has added about 120,000 new jobs, with much of that growth related to hiring coming from the energy industry and domestic production.
The economic boom of 2014 surprised a number of economists, including Gilmer, who projected a year ago that Houston would gain only 64,900 jobs in 2014, a forecast that turned out to be far too low.
The year ahead should also bring improvement in the national economy and that will prop up the Houston economy, Gilmer said.
Another major prop for Houston will be petrochemical plant construction. Some $50 billion in ethylene plants are on the drawing boards and a number of LNG export terminals are proposed as well.
But if oil prices are low, that will cause a decline in domestic drilling activity and that will be a negative for Houston’s economy.
Gilmer, speaking to a crowd of 900 at the Hyatt Regency in downtown Houston, said commercial and residential real estate markets are healthy in Houston area.