States dependent on oil and gas revenue are bracing for a ripple effect from falling oil prices. CCTV America’s Ginger Vaughn reported this story from Houston.
Texas bracing for a ripple effect as oil price fallsStates dependent on oil and gas revenue are bracing for a ripple effect from falling oil prices. CCTV America’s Ginger Vaughn reported this story from Houston.
In Texas, the price of regular gas has tumbled to less than $1.6 a gallon, or 3.8 liters, which is great for consumers, but less for this state. Oil production has made Texas the world’s 14th largest economy, ahead of Spain, Indonesia and Iran.
Three of the top ten Fortune 500 companies are oil companies headquartered in Houston.
“First, they are going to cut their capital budget, so that means essentially defer some projects that otherwise would have been on the fast burner, and in the ‘shales’ where the big effect will happen, the companies will end up lowering the number of wells they drill a year, just concentrating on the best possible of wells,” Chris Ross, executive professor at the University of Houston said.
Since June, the price of West Texas Intermediate crude oil has been cut in half. Oil companies aren’t renewing contracts for drilling off the Texas coast.
In Houston, that means layoffs. Oil company Hercules Offshore said it will lay off more than 300 of its employees, a cut that represents 15 percent of the company’s total workforce, according to the Wall Street Journal.
By some estimates, one of these Texas energy jobs has same the purchasing power of three non-energy ones.
The overall U.S. economy may weather the plunge. While some U.S. officials said the average American household will spend around $550 less a year on gas this year than last year, a lot of that spare cash will be spent on shopping and restaurants, according to the Wall Street Journal.