{"id":31055,"date":"2013-09-10T12:04:40","date_gmt":"2013-09-10T17:04:40","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=31055"},"modified":"2013-09-16T14:14:43","modified_gmt":"2013-09-16T19:14:43","slug":"how-the-west-texas-drilling-boom-could-go-bust-again","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2013\/09\/10\/how-the-west-texas-drilling-boom-could-go-bust-again\/","title":{"rendered":"How the West Texas Drilling Boom Could Go Bust. Again."},"content":{"rendered":"
\"A

Photo by Terrence Henry\/StateImpact Texas<\/p>

A pumpjack in West Texas.<\/p><\/div>\n

MIDLAND-ODESSA — It’s happened before, and it could well happen again. The current surge in drilling in West Texas is a product of advancing technique and technology, but it’s also a function of price and demand. So if the market will pay a certain price for oil or gas, it makes sense to drill. If it doesn’t? Well, that’s the side of the boom that people don’t like to talk about. Welcome to The Bust.<\/p>\n

The last time a major bust hit Midland-Odessa was in the early eighties. Leading up to that time, high oil prices brought prosperity (including a Rolls Royce dealership) and development. High rises went up, and there was so much demand for housing that “newcomers to the city were living in tents, cars, and trailers,” according to\u00a0the\u00a0Texas State Historical\u00a0Association<\/a>. But\u00a0when the price of oil dropped rapidly and supply greatly increased, drilling pretty much came to a stop in the Permian Basin. The Rolls Royce dealership closed. Three banks failed<\/a>, causing depression-style runs on deposits. Offices became vacant, and new houses sat unsold.<\/p>\n

Now, several decades later, things are booming again. Midland is now the second wealthiest city per capita in the country<\/a>. Mercedes and BMW dealerships are open along Andrews Highway. A job at McDonald’s here starts at $14 an hour, with a signing bonus. Unemployment is at one of the lowest rates in the country. But\u00a0there’s also a palpable fear the boom could bust again. All it would take is a drop in the price of oil. If that happens, Texas’ boom could be the victim of its own success.<\/p>\n

People are here \u201cto get their money and get out,\u201d one oilfield worker in Odessa said, asking that his name not be used because of company policy. If a bust happens, he said, \u201cthis will all be tumbleweeds.\u201d<\/p>\n

“Living here is terrible,” the worker added. “Everything’s overpriced, the food is overpriced, living is overpriced.”<\/p>\n

\"Kirk

Photo by Mose Buchele\/StateImpact Texas<\/p>

Kirk Edwards, with Las Colinas Energy Partners, says both the boom and bust depend largely on one thing: the price of oil. <\/p><\/div>\n

Something else that could be overpriced? Oil. With drilling, there’s usually a “sweet spot” where price and demand make it profitable. “Tell me what the oil price is going to be and I’ll tell you how busy [drilling] is going to be,” said Kirk Edwards, President of Las Colinas Energy Partners, at a forum on the boom hosted by StateImpact Texas last month.<\/p>\n

“Usually, at 80 bucks a barrel, these wells are still very economic,” he said. Oil has been over a hundred dollars a barrel for nearly the whole year thus far, so drilling — and all the business and royalty payments that go along with it — is profitable.<\/p>\n

But just a few years ago oil was around 60 dollars a barrel, and that could happen again. “Surging supply from U.S. shale and similar technologically-driven unconventional oil sources is likely to create excess supply and put strong downward pressure on oil prices,” professors Mahmoud El-Gamal <\/a>of Rice University\u00a0and Amy Meyers Jaffe<\/a>\u00a0of UC Davis\u00a0wrote in a research paper<\/a> on oil prices this summer.<\/p>\n

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