The oil industry has hit a new low. Companies that enjoyed record profits during recent years are now forced to decommission rigs and cut investments. Over 100,000 employees have been laid off. Things are particularly bad in Texas, where industry depends heavily on the price of oil.
Manufacturing activity in the Lone Star state generally ramps up between August and December, but last month ended in collapse. According to the most recent Dallas Fed manufacturing survey, August revenue will be even less than the weak month of July.
July’s manufacturing index was -4.6. Economists thought that number would improve a little and predicted -3.8 for the month of August. Instead, they found a shocking -15.8.
We have the Lone Star state to thank for the recent oil boom in the U.S., but the oil price crash is starting to have a big effect on Texas business.
Executives and business leaders have been keeping a close watch on reports during recent months. “Overall business is slowing,” said a representative from the primary-metal manufacturing industry.
Those in the fabricated-metal manufacturing industry agree the drop in oil prices is “expected to soften the demand for our basic fabricated products.”
The price of oil stabilized at about $60 per barrel during the spring, but dropped throughout the summer. West Texas Intermediate (WTI) crude dropped below $38 per barrel in early August, but as of this Monday was trading at about $44. This number is nearly 60% lower than it was last summer.
Analysts predict that it could be years before the price of oil returns to where it was last June (about $100 a barrel). This could mean serious economic hardship for Texas, Alaska, Oklahoma, North Dakota, and Louisiana.
“Uncertainty about where the price of oil is headed has everyone on pins and needles,” said a representative from the machinery manufacturing industry.
The ongoing decline in oil price reflects a depressed view of the future and a decline in current business output. “Oil and gas prices, weather, world outlook, and politics make for a poor forecast,” said an executive in the misc. manufacturing industry.