The oil bubble has burst

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 The law of supply and demand can't be repealed by wishful thinking.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.

Comments

[Rob O.]

Anyone who's lived here for any real amount of time knew this bust was looming. Sure, we hoped that the wildly unrealistic predictions for how long the boom would last might be remotely true, but true West Texans knew.

Perhaps what frustrates me most is that when the boom was mounting and certainly by the time it was a fever pitch, our communities should've been making the most of what they knew would be a fleeting opportunity to seriously overhaul the civic infrastructures.

Most notably, some (most?) of the key corridors in Odessa were anemic and insufficient even during the worst bust years. University Blvd, 8th St., and 2nd St. are, like it or not, the East/West corridors that many must use to traverse Odessa daily. Those streets should have been widened 2 decades ago. But certainly we should've seized the boom bucks to do so a year or two ago.

Likewise, some of the North/South corridors are just as logjammed. Grandview Ave., south of University is especially bad. Dixie isn't great either. Andrews Hwy/Grant bottlenecks south of 42nd very quickly and only gets worse as you travel towards downtown. Boom traffic made them much worse, but these streets were, again, bad 20 years ago.

The jackwagons who proclaimed that this boom would last anywhere between 17 -52 years need a swift kick in the nether regions. They either didn't believe their own implausible rhetoric or they just didn't feel the need to make improvements since traffic on Faudree is not bad.

[Geo]

Here in Midland we had the elected officials falling all over themselves to help built a skyscraper in the space occupied by the old courthouse.

When the developer couldn't lease enough space to justify the thing, that was a huge warning flag. Huge.