July 14, 2020

Still Reeling From Oil Plunge, Texas Faces New Threat: Surge in Virus Cases

On Thursday, Governor Abbott issued an executive order suspending elective surgery in four populous counties to ensure that hospitals have the space to care for coronavirus patients. He also paused further business reopenings.

William Presta, a barbershop owner in the Houston suburb of Bellaire, closed on March 22 and reopened on May 12. Business was going well until this week when demand suddenly dried up, he said, so he has decided to close the shop next week and take a vacation.

“I’m just being conscious and smart and trying to keep out of harm’s way,” he said.

Texans are accustomed to a gyrating economy that has long soared and tanked along with oil and natural gas prices. There have been four steep oil downturns in the last four decades. In the 1980s, for example, a sharp drop in oil prices devastated the state’s energy companies and banks. Three out of every four petroleum worker lost their jobs.

Over the years the state economy has diversified, with medical centers mushrooming in Houston and Dallas, and Austin becoming a technology hub. But energy remains a critical part of the state’s economy. The shale fracking revolution has made Texas the leader of a national energy boom and fueled an expansion of petrochemical plants and natural gas export terminals.

At the start of the year, Texas oil and gas companies appeared to be doing OK. The U.S. benchmark oil price hovered around $60 a barrel. When the pandemic took hold, and Russia and Saudi Arabia briefly flooded the market with oil, the price dropped to $20 a barrel in March, and then, in a first, briefly dropped to more than $37 below zero.

Oil companies shut down wells and stopped new drilling except when companies were legally obligated to employ rigs under contract.

More than 26,000 Texas oil workers — roughly one in four — lost their jobs in April, according to state employment data. That was the largest single month of oil and gas layoffs. But the impacts were far greater, rippling across the state, hurting businesses that serve the energy industry and its workers. Regional banks, many of which have large oil-company loan portfolios, are being strained, and investments in pipelines are being delayed.

Article source: https://www.nytimes.com/2020/06/25/business/economy/texas-economy-oil-coronavirus.html

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