Oh, those were the days: “The boom in the Gulf drives our optimistic outlook for the Lafayette MSA which we expect to add 5,700 jobs over the next two years.”
Those were the days, about six months ago.
A lot of people in the Lafayette MSA, or metropolitan statistical area, not to mention in Houma and Thibodaux along the coast, are hoping this prediction still holds.
And it might, maybe, but the collapse of the price of oil makes many households in Louisiana nervous.
The prediction quoted above was from the Louisiana Economic Outlook published last year by LSU economists Loren Scott and Jim Richardson. The economic analysis is one of the deeper looks at trends in the economy and it’s backed up by numerous conversations with regional business leaders in each part of the state.
Any analysis, though, begins with assumptions, and the two economists projected only a relatively small drop in the price of oil as the backdrop for their predictions. In the oil patch, they’d take $92 a barrel right now, but that’s unlikely for the moment.
That contributes to a sense of unease in Lafayette. Growth and prosperity have been fueled in part by the no-joke boom in oilfield service companies, many of them local businesses as well as international companies with operations far beyond the Gulf of Mexico. They service a global industry in other states with shale drilling across the country and in deep waters across the world.
An oil price collapse, even for a while, doesn’t mean the end of Lafayette as a prosperous place, but it certainly emphasizes the differing interests in energy between Lafayette and its neighbors across the Atchafalaya Basin (Baton Rouge) and the Mermentau River (Lake Charles), both regions more economically invested in processing oil than drilling for it.
And the boom that Scott and Richardson projected in industrial construction isn’t going to go straight away, even if some gas-to-liquids projects are shelved, at least temporarily. The giant Sasol expansion, a $14 billion project near Lake Charles, has been put on hold because the low price of oil makes the project less attractive.
The continuing low price of natural gas contributes to the industrial boom, including several major construction projects in southwestern Louisiana, where liquefied gas will be exported to Japan and other customers. The Baton Rouge and New Orleans areas benefit from continuing petrochemical expansions. Still, layoffs and other cutbacks such as furloughs and health insurance cuts will ripple through businesses in the oil patch. Maybe it won’t be the catastrophic fall that us gray hairs struggled through in the 1980s; many companies are headed by veterans of that time who were wary of overextending their operations over the last couple of years.
But for the oil patch, higher oil prices can’t come soon enough.