Job losses due to sinking oil prices eventually may plague Louisiana—but not yet.
As The Advertiser reports, rumblings about such jobs at risk reverberated around neighboring Texas last week, based on a Federal Reserve Bank of Dallas model. That model suggested some 250,000 jobs may be at risk in eight oil-producing states that include Louisiana. About half of those job losses would be in oil-soaked Texas.
The projections, published by FuelFix.com, were based on a model used in a 2013 Council on Foreign Relations brief, “The Shale Gas and Tight Oil Boom: U.S. States’ Economic Gains and Vulnerabilities,” written by Stephen P.A. Brown, a University of Nevada, Las Vegas, economics professor, and Mine K. Yücel, senior vice president and research director at the Federal Reserve Bank of Dallas.
Yücel says the projected job loss numbers appear to be high, adding the model also projects that as many as 30,000 jobs are at risk in Louisiana. Although those numbers may be on target if the price of oil remains mired in a slump this year, she says the projected job loss number is by no means certain because the model used in the scholarly brief was meant to measure growth due to oil price increases, not decreases. Nonetheless, she says, there was some symmetry in the model for gains and losses.
“In real life, you take that with a grain of salt,” she says of the projections. “The response is usually smaller for a decline in price than an increase in price.”
Yücel said offshore oil and gas operations—much of Louisiana’s oil is produced offshore—may face an uncertain 2015 because offshore operations come with a high price tag. But economist Loren Scott says offshore operations are built with the long haul in mind, with plans that extend for a decade or more. Yücel and Scott served together on LSU’s economics faculty before she joined the Fed in 1989.
“With deep water, I think there you are not going to see much change at first,” Scott says. “Companies that operate in the Gulf of Mexico, they have 10-year plans. They are looking way out. A short-term dip—that’s what this is—it really doesn’t affect their plans very much.”
