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ECONOMICS REPORT - Oil Price Drop Both Good and Bad for Texas Workers

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Oil Price Drop Both Good and Bad for Texas Workers
Oil Price Drop Both Good and Bad for Texas Workers

The sharp drop in world oil prices has led oil companies in the United States to dismiss thousands of workers. Some companies have also suspended new oil drilling and exploration projects. The drop in oil prices has also affected small service companies and even stores that do business with oil companies in big producer states like Texas. But the drop in oil prices has not been bad for everyone.

Oil platform workers are often called roughnecks. In Texas, many roughnecks have lost their jobs because of the drop in oil prices. The effect of falling prices has been worse in states like Alaska and North Dakota. That is because production costs are higher there than they are in the Eagle Ford area of south-central Texas.

Some oil drilling projects are working to keep their costs low. If the price of oil stays above $40 a barrel, they can still make a profit.

Adam Perdue is an economist at the University of Houston's Institute for Regional Forecasting. He has been studying the effect of falling oil prices in Texas.

Mr. Perdue says oil company exploration and production budgets are being cut between 10 and 50 percent, with most of them being cut by a third. He says the city of Houston experienced five percent growth rates in recent years. He thinks the lower spending will affect the local economy.

"We're predicting that there's gonna be 20,000 fewer jobs than there would have been otherwise. So, we're still predicting growth in the Houston area; it's just gonna slow down to a more reasonable rate of about, or just under two percent."

The economic slowdown will affect companies that manufacture pipes and other equipment for oil exploration and production. It will also have an effect on trucking companies that supply sand and chemicals, and other small businesses that serve the energy industry.

But low oil prices are good for chemical companies. They use hydrocarbons found in oil to make fertilizer, plastic and other products. Adam Perdue says a new chemical plant project near Houston will provide jobs for many skilled workers.

"A lot of these roughnecks that are gonna lose their jobs out there in the field are gonna be able to come home and, and, and get a welding job or a construction job."

He says oil industry experts believe prices will rise again in about six months when the oversupply of oil is reduced. Experts say the oversupply resulted from expanded production. But he says if those predictions are wrong and oil prices continue to fall, the economy of Houston and Texas will be hurt much more.

I'm Christopher Cruise.

This report was based on a story from VOA Correspondent Greg Flakus in Houston. Christopher Cruise wrote the story in VOA Learning English. The editor was George Grow.

_______________________________________________________________

Words in this Story

roughneck n. someone who works on an oil rig or at an oil well

fertilizer n. a substance (such as manure or a special chemical) that is added to soil to help the growth of plants

How has the drop in oil prices affected you and your country? We want to know. Write your thoughts in the comments section.

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