Although no one could have predicted the exact date, the graphs showing meteoric oil production increases over the past few years were the handwriting on the wall. The law of supply and demand can't be repealed by wishful thinking.
Forbes paints an ugly picture:
Prof. Bill Gilmer of the University of Houston has crunched the numbers on some worst-case scenarios for Houston. Assume an average 33% reduction in oil company capital spending this year, followed by 5% growth in 2016. That, figures Gilmer, would result in the loss of 75,000 Houston jobs. This would be an enormous shock considering that Houston has added 100,000 new jobs every year since 2011.
And it’s not just Houston. In North America, Midland, San Antonio, Sweetwater, Oklahoma City, Williston, Pittsburgh, Alberta, Mexico City, and even Bakersfield, Calif. will feel the pain. The layoffs have started, with about 15,000 cuts announced so far from the likes of Shell, BP , Pemex, Halliburton HAL +0.13%, Suncor and more (full list compiled at the end of this piece) and they will only get worse.
The oil and gas business is cyclical, and the cycles are long. We appear to have entered the downside of this particular cycle.