COLLEGE STATION, Texas--()--Texas has been a major beneficiary of increased oilfield employment, and that continues to have a positive impact on many of the state’s real estate markets.
“Crude Awakening; Oil, Gas Jobs in Play”
“It’s no secret that the oil and gas sector has been one of the few bright spots in the U.S. economy during the past few years,” said Dr. Harold Hunt, research economist with the Real Estate Center and Mays Business School at Texas A&M University.
“A recent PricewaterhouseCoopers (PWC) report estimates the oil and gas industry supports about two million direct and indirect Texas jobs that power 24 percent of the state’s economy,” he said. “As a result, Texas residential and commercial real estate markets are largely outperforming those in the rest of the country.”
Although employment gains reach well beyond the oil patch, some of the biggest effects have been in areas at the heart of drilling activity. Hunt’s research shows the significant impact oil and gas activity is having on some of the most active counties in the Permian Basin and Eagle Ford and Barnett shale regions, referred to in oilfield jargon as “plays.”
“Negative oil and gas job growth in the Eagle Ford before 2008 and strong positive growth since 2010 shows the dramatic difference in oilfield activity before and after shale discoveries,” said Hunt. “The rate of year-on-year job growth exceeded 90 percent in June 2011.”
Positive oil and gas employment in the Permian held up much longer than the other two plays and Texas as a whole, said Hunt. The Permian has traditionally been an oil play, and oil prices in excess of $100 per barrel throughout much of 2008 helped extend positive job growth there.
“The assumption that crude prices will remain relatively high while natural gas prices remain low is driving a number of significant changes that will affect Texas real estate,” said Hunt.
Hunt noted the large projected increases in a closer and more affordable supply of natural gas liquid is driving companies to expand capacity at their facilities. Other sectors benefitting from low natural gas prices include electrical power generators and manufacturers of paper products, plastic products, cement, fertilizer and fabricated metals.
Hunt said manufacturing along the Texas-Mexico border may benefit as well. For example, Brazil’s Santana Textiles is constructing a $180 million denim plant in Edinburg. Company officials said low natural gas costs played an important role in the decision to locate in Texas rather than Mexico.
PWC reports that inexpensive natural gas could help U.S. manufacturing save more than $11 billion per year and create 500,000 new jobs by 2025.
“The lure of cheap natural gas is raising expectations for a reindustrialization of America,” said Hunt. “Texas is well positioned to take advantage of low-priced energy. This is good news for the state’s real estate markets.”
To read more about Hunt’s research, including the effect of rig counts on private employment, the outlook for oil and gas prices, and the benefits of low natural gas prices, read “Crude Awakening; Oil, Gas Jobs in Play” on the Center’s website.