ODESSA – The region’s oil and gas industry continues to generate economic strength and is expected to continue doing so for at least the next five years.
That’s the economic outlook offered by economist M. Ray Perryman at his annual economic outlook luncheon hosted by Frost Bank at Odessa Country Club.
“We feel very optimistic about the area,” Perryman told reporters in advance of the luncheon. “There’s a lot going on.”
Perryman said “the cost of producing petroleum has gone down so much” that Permian Basin operators can withstand declines in crude prices, such as that seen in the fourth quarter of 2018.
“With that comes a more permanent situation,” meaning the cyclical boom-and-bust nature of the industry will be less extreme in the future, he said.
Perryman’s organization, The Perryman Group, forecasts that both Midland and Odessa will enjoy economic expansion well above that of Texas and the nation. The Midland metropolitan statistical area, which encompasses Midland and Martin counties, will see a 2.01 percent growth in population through 2023 for an addition of about 18,324 residents. The MSA is expected to enjoy a 2.44 annual employment growth rate for a gain of over 13,000 jobs in the next five years. And the MSA is forecast to experience a 5.02 percent annual rise in real gross product, for a total gain of more than $18.8 billion.
The Odessa MSA is expected to experience similar growth, with the population rising 1.57 percent or 13,216 residents. Employment is forecast to growth 2.14 percent with the addition of over 8,500 net new position, led by the service sector. Odessa should see its real gross product rise by 4.21 percent, resulting in a gain of about $2.4 billion by 2023 with the mining sector contributing over $990 million of that increase.
That economic growth enjoyed in the Permian Basin is expected to spread across the state of Texas, according to Perryman.
“Every molecule of oil from this place is being exported,” he said.
That surge in exports is translating in the investment of billions of dollars in pipeline expansion and construction to move Permian crude and natural gas to the Gulf Coast, and a similar investment in export facilities along the Texas Gulf Coast. Refineries along the Gulf Coast will also be investing billions in retooling their equipment from the heavier crudes that have dominated the nation’s crude imports, such as from Venezuela, to process the lighter crudes coming out of the Permian and the Eagle Ford.
“It will have a big impact here and on the coast,” he said.
But such strong growth also brings challenges, especially since it’s expected to become more permanent, Perryman said. That permanence heightens the need to address issues with housing, workforce needs, infrastructure – such as roads — as well as education and health care.
The good news, according to Perryman, is that steps are being taken to address those needs.
“We have these initiatives,” such as Priority Midland and Permian Strategic Partnership, he said. “Everyone is aware, everyone is trying to figure out how to address the issues. The companies themselves are recognizing that they have to operate differently in the future.”
For example, he said companies are realizing it would be more cost-effective to invest in workforce housing that pay $500 a night for hotel rooms to house workers.
“These are very real issues people have to deal with,” he said.
The other piece of good news, he said, is that “the communities recognize these are not quick-fix issues.”
Similar issues are being felt across the state as Texas also enjoys strong growth that is drawing new residents — about 1,000 a day.
The nation, too, should continue to enjoy relatively strong economic growth over the next five years, though uncertainty about issues ranging from the U.S.-China trade war to a slowing Chinese economy to the European economy and how it will be impacted by Britain’s ‘Brexit” could impact growth.