Oil price decline devastates many towns in west Texas

MIDLAND, Texas -- They've seen it all before, the moving vans and U-Haul trailers streaming toward the exits, the graveyards of steel sprouting along the desert roadsides, the dust darkening the windows where lustrous deals had been done and the long, weathered faces in the unemployment line.

The last time was in 1986, when the price of oil dropped from $30 a barrel to $10 almost overnight, and people left town so fast they didn't pause to lock up behind them.

Now they are seeing it again, although this time it is different. This time, the rot spread slow and deep across the Permian Basin, crept in so gingerly that it was almost imperceptible until the foundation buckled and the roof sagged. For nearly a year and a half, oil prices receded in increments that minimized panic -- a buck here, half a buck there -- until a barrel of crude was worth less than a bucket of fried chicken. By the middle of February, the spot price for West Texas Intermediate fell to as low as $8 a barrel -- the lowest inflation- adjusted price since the Great Depression -- and the broad consequences set in. `'It's pretty ugly out here,'' said Marshall Watson, an independent producer, who recently laid off six of his eight employees and shut in half of his 150 stripper wells. `'This crash is 10 times worse than the `86 crash. Back then, the price dropped and came right back. This has been a long drought. It costs $12 to lift a barrel of oil that we can sell for $9. We're down to the bare knuckles.'' No one is betting on a quick recovery. Oil is abundant around the globe, and troubled economies in Asia and South America have reduced demand. In addition, alternative energy and renewable motor fuels have achieved such prominence in the marketplace that Arco Chairman Mike Bowlin recently said the world is seeing the beginning of the end of the Oil Age. Watson also believes that the `'long drought'' that began in November 1997 and accelerated late last year may be the death rattle of the Permian Basin, which, in its heyday, produced more oil than any field in the lower 48 states and was the well that irrigated the Texas economy. Now, exploration is almost nonexistent, scores of pumps have been turned off and the crude flows from the basin at a relative trickle. Service companies that once thrived on drilling now survive by plugging holes. `'Once those wells are plugged,'' Watson said, `'they'll never be reopened. The workers are leaving and they won't come back. This is a friendly ghost town.'' Alarmist hyperbole? Maybe. Maybe not. On the surface, cities such as Midland and Odessa appear far from dressed for a funeral. In fact, a regional economic index prepared early this year by Ingham Economic Reporting shows only a fractional decline during 1998, thanks mainly to strong retail sales, motor vehicle sales and motel/hotel revenues. Beneath that gloss, however, are more troubling numbers: Permits for new home construction fell nearly 2.3 percent, the value of all building permits declined by 25 percent and sales of existing homes dropped from 2,290 to 1,642. The unemployment rate jumped from 3.8 percent to 6.5 percent during the year and reached 9 percent at the end of February. More than 1,900 jobs were lost last year in Midland and Ector counties and hundreds more vanished in the other 15 counties of the Permian Basin. Leading the downward spiral of those key indicators was the oil and gas activity index, which tumbled 32 percent during the year.

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