Now if they could just do that with college tuition.
Even as the Great Recession was unfolding in 2008, the seeds for a second-half 2014 collapse in oil prices were being sown.
You no doubt remember. As Lehman Bros. declared bankruptcy in mid-September 2008, the oil & gas majors and biggest oil-field service companies, including Halliburton and Schlumberger, were laying off thousands of people, including most of the great many they’d hired too hastily during the boom.
But this editor will testify that also by 2008 anyone perusing the pages of Houston-based industry publication, Oil and Gas Investor, might well have perceived that the breaking story had already morphed into: “All shale gas, all the time.”
Oil production in the North Sea has been declining since 2009, with some slight signs of optimism the last year, but now in late December 2014, the BBC says, with a price of around $60 a barrel, the North Sea oil industry is near collapse.
Already, industry wide, Goldman Sachs predicts capital expenditure cuts of 30 percent. Frost & Sullivan says in a report that with oil at $60 a barrel, industry exploration & production spending should decline to nearly $660 billion, down from an estimated $723 billion in 2014. Frost & Sullivan further predicts industry consolidation and greater use of digital assets will result, although the latter supposition seems frankly a little gratuitous.
Beyond accounting numbers, it’s significant that in a world of growing unrest, falling oil prices will seriously stress the already stressed Russian economy. Because, after all, there’s nothing like foreign military adventures to take people’s minds off a troubled domestic front.
According to an analysis by Vitaliy Katsenelson of Institutional Investor the factors causing the fall in prices so damaging to the Russian economy include increasing supply due to U.S. shale drilling, slowing demand growth as China’s economy cools and a dollar stronger because of struggling economies around the globe.
These boom-and-bust effects will no doubt rocket randomly around the world until finally landing back here in the Americas. One can understand the rise and fall, the ebb and flow of business. But with oil the boom and bust is a big cliché, and is both cause and effect of bad decision-making.
Take two simple examples bearing on people. In Houston, educators are working to bring petro-chemical engineering programs back to the universities. Past programs were discontinued, because some years classes were chock full but near-empty shortly after. As debilitating over the long haul, mature engineers in the prime of their productivity are laid off and never make it back into the industry to share their seasoned judgments born of experience.
But when you hit a gusher, it really pays off.