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Expect significant, long-term economic impact of low oil prices, economists say

Drop in oil prices sends ripple effects through Southeast Texas

HOUSTON – While the world is dealing with a pandemic, a slump in oil prices is expected to hit the Houston area especially hard.

Three top impacts:

Loss of high-income jobs:

No other sector pays as well as the oil sector with blue-collar workers easily making $100,000 per year and white-collar workers often earning more than $150,000.

“It will be a struggle to find comparable jobs to replace the ones we’re losing in oil and gas,” said Patrick Jankowski, Senior Vice President for research at the Greater Houston Partnership. Jankowski is a guest on Houston Newsmakers and says many of the workers losing their jobs today may never work in the energy industry again.

Region’s shrinking revenue ripple will be easy to see and feel

“We’ve been under-investing in new and maintenance infrastructure spending on roads, drainage, and other projects for close to two decades,” said John Diamond, Ph.D. and the Director of the Center for Finance at the Baker Institute at Rice University.

With the loss of moderate and high paying jobs, real estate values and individual wealth will also suffer which means reduced investment and tax revenues.

“Even before the recent and dramatic decline in oil prices and the shutdown due to the health crisis, Houston was struggling to get by as unfunded pension liabilities put tremendous pressure on the fiscal health of Houston,” Diamond said.

Slower recovery than during the Great Recession

Expect many other Houston business sectors to suffer.

“Office brokers, engineering and accounting firms, airlines, hotels will feel the impact,” said Jankowski, who added that on the consumer side the effects will include residential real estate, car dealers, restaurants and more. He said during the Great Recession of 2007-2009 the Eagle Ford Shale boom helped Houston energy sector lead a recovery.

Not this time.

Hear more from economists Diamond and Jankowski on this week’s Houston Newsmakers and Newsmakers EXTRA:

Also this week:

Emilee Dawn Whitehurst, the President and CEO of the Houston Area Women’s Center on the increase in domestic violence calls during this pandemic and the City of Houston call for increased domestic violence awareness and the www.nocovidabuse.com website,

AND

Jim Nelson, Executive Director of the Houston Ballet on the cancellation of its 50th anniversary season and it embrace of social media to stay connected with the community and in preparation for a re-opening by Fall.

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