Texas sCrewed

Currencies of nations whose economies are strongly dependent on the price of oil have fallen… or if you are Russia… plummeted. Oil-powerhouse Venezuela’s battle between incumbent mega-socialists and more conservative politicos have turned violent-in-the-streets as store shelves are virtually empty and basics have soared in price despite a massive governmental effort to impose wage and price controls. American states and Canadian provinces that have drilled and fracked their way to petroleum overdrive have watched their local budgets strain from the extreme drop-off in tax revenues generated by oil, from royalties from the slippery substance itself and the income tax generated at both an individual and corporate level. Layoffs and cutbacks rule.

In a state with no personal income tax, fiercely proud of its independence and its self-reliance, that once rosy outlook has turned a bit gray. Texas. Oil is selling at way below the $114/barrel last year at this time. Less than half. “This is a global world we live in, and so a slowdown in Chinese demand, coupled with a Saudi stubbornness to keep production at the same levels, has led to thousands of Texan oil workers being laid off, and a vast numbers of wells being mothballed.” BBC.com, February 23^rd.

While the drop in prices at the pump has had a whole pile of benefits for many others – more money in consumers’ pockets spurring retail sales, cheaper shipping costs and lower corporate operating costs – for many segments of the global economy, such a steep decline has been nothing short of a disaster. There is a touch of the “gloat” as many oil-despots, from Venezuela’s Nicolás Maduro Moros to Russia’s Vladimir Putin, have some serious explaining to do to their constituents, and are scrambling to blame the global “American conspiracy” against them as the “real” explanation. Even ISIS with its captured oil fields is “suffering” from a decline in revenues. But there are plenty of Americans suffering from the plunge in the price of oil as well.

Meanwhile, back at the (Texas) ranch, the probability that oil isn’t likely to return to much more than $80/barrel anytime soon plays hob with the massive investments in systems and technologies to extract hard-to-get oil, costs that are only justified at the higher reaches of recent oil prices. Maybe the side benefit will be a lighter impact on the environment than the mini-quakes and polluted (or flammable with pockets of natural gas) groundwater that have been blamed on the pressurized chemicals used in the fracking process… coaxing oil out of the nooks and crannies missed in a bygone era when crude was easier to extract. Until an exhaustible supply of petroleum inevitably succumbs to the supply and demand curve and rises to new heights.

In a February 23^rd report, the BBC.com (North American editor Jon Sopel visited a freezing Texas oil field) profiled this economic malaise from the perspective of one oil-worker, Storm McDonald (yup, that’s his name), well-known in the tough world of petroleum extraction. “He is a burly Texan and has worked in oil fields all his life. He's spent three years drilling in North Dakota on the Canadian border. He's worked on the biggest oilfields around the United States doing every dirty job imaginable. But though he lacks the white gloves and a baton, he is now the conductor of this orchestra - and he's still only 30. Outside in the icy cold, men are wearing hard hats, goggles and headsets awaiting his instructions. It is gone one o'clock in the morning when we strike up our conversation - and though presumably somewhere there is a warm bed waiting for him, he is in clover. He loves what he does. Adores it. The smell of oil, the gush of oil, the riches that oil can sometimes bring - but also the hard, physical labour [hey, it’s the BBC!] involved.

“He tells me about the boom times - when every bar is heaving and every supermarket shelf is empty, when you have to drive for hours just to buy clothes or food because all the towns nearest to the oil boom have sold out of everything.

“The company he's working has six sites - four have been closed, and when they complete the frack on this one the owner says the probability is that they won't pump the oil. They need the price to be at $80 a barrel to break even - and today the price is nowhere near that.

“But Storm is philosophical. He says that although this downturn was unexpected, it will pass. He says that in this industry when the times are good, you put money away for when the times are bad - in other words, says Storm, this storm will quickly pass.”

As much as most of us are enjoying a respite at the pump, there probably is a happier medium at a more sustainable cost of oil. On the other hand, most of us are acutely aware that Big Oil has really never done us a whole lot of favors. But trust me, those at the top of Big Oil are still doing fine… but I cannot say the same as we move down that corporate hierarchy and into the oil fields themselves.

I’m Peter Dekom, and there are always at least two sides to every story.