By Abby Hamilton
For Plainsman Online
Globally, the pandemic and oil crisis have been exacting chaos. Locally, the impact on the economy has been atrocious.
James Kemper, assistant professor of economics at South Plains College, gave insight into how local economies are handling the stress of 2020 during his presentation, “Two Crisis at Once: How the Pandemic and Oil Glut Have Affected our Local Economies,” on Sept. 25 in the Theatre in the Fine Arts Building on the Levelland campus. Kemper focused on four main cities: Lubbock, Amarillo, Midland, and Odessa.
“These cities give a good impression of how West Texas economy is functioning through COVID-19 and the Oil Crisis, as well as what the future economy could look like for West Texas,” explained Kemper.
Kemper said he was inspired to study economics by his first economics professor at West Texas A&M University. This led Kemper to work in the banking industry before the 2008 recession. Watching the economy work in real time inspired Kemper, and led to his teaching at South Plains College and Texas Tech University.
Again in 2020, Kemper has had the opportunity to watch the economy in real time. According to Kemper, “Lubbock, Amarillo, Midland, and Odessa had relatively good economies before the pandemic and most recent oil crisis. These areas also have historically low unemployment rates.”
Midland and Odessa economies differ from Lubbock and Amarillo economies. Midland and Odessa’s economies rely heavily on the oilfield. The oil industry is an unstable market that continually expands. From 2010 to 2017, there was a 13% increase in the oilfield workforce.
“Lubbock and Amarillo, on the other hand, have diverse economies,” Kemper said. “Hospitality, food, and retail are jut a few factors contributing to their economies. This diversity lends to the stability of their economies.”
Kemper broke down the timeline for COVID-19’s affect on Lubbock and Amarillo from March through May. During March, people began fearing losing their jobs, COVID-19 itself, and many other things. Kemper stated, that “this fear prompted people to stop spending money.” By April, Governor Greg Abbott issued a statewide stay-at-home order. At this time, the economy was already slowing down. In May, businesses were able to re-open under government stipulations.
“This influx of business allowed the economy to begin recovering in these cities,” Kemper said, “but Midland and Odessa are not so fortunate to have diverse economies helping them bounce back.”
The Oil Glut began at the end of 2019 and was only worsened by the pandemic. Kemper explained that the Oil Glut is caused when the largest oil producers create more supply than there is demand in the world. OPEC (Organization of Petroleum Exporting Countries) is a group of countries who control the mass production of oil.
“These countries do not have particularly grand foreign relations with one another, leading to the unstable oil market Midland and Odessa rely on,” Kemper said.
In March, OPEC attempted to come to an agreement over their overproduction of oil, but the talks ended with no agreement. This failure to come to an agreement led to the “perfect storm” in April, explained Kemper. The price of a barrel of oil drastically dropped to $20 per barrel by the end of March. Oil prices had not fallen below $50 per barrel since the 2017 oil crisis, which West Texas had not fully recovered from. Once the pandemic hit and people began to use less goods and stay home, oil was not being used on a global scale.
“This sudden drop in oil use caused a demand sock,” said Kemper. “Mid-April oil prices dropped to $0 per barrel due to over production and the loss of market demand. By the end of April, the price of a barrel of oil was negative $37.67.
“Oil being ‘negative’ means the oil producers were having to pay to have barrels taken away to keep producing,” explained Kemper.
Kemper reported that “Lubbock and Amarillo will be able to stimulate their economies much faster than Midland and Odessa.” Data has shown that in May, June, and July, economic recovery was looking promising. Kemper said this economic upturn “could be from the stimulus and people feeling more comfortable going out in public.”
The diverse economy also helped this area bounce back. Oilfield workers in Midland and Odessa, however, have suffered from severe work hour cuts rather than layoffs and need oil to be used on a global scale. Kemper said that “keeping in mind oil was already heading for a recession, the blow from the Oil Glut and the pandemic have only prolonged the economic healing process.”
For Hockley County, SPC is godsent in these times. Levelland’s economy is a mix of oil and education. Kemper said, “If others do their part by wearing a mask, following social distancing, and staying home when sick, this can help keep SPC’s classes on campus rather than online. With students in Levelland, the local economy thrives, and the college may look forward to increased enrollment due to people wanting to gain valuable skills to retain a reliable job.”