but there's no other way to say it:
June 30, 2008; Page R14
Booms, after all, inevitably mean busts to come, as the vacant office
towers that line
oil priced at more than $100 per barrel, WSJ's Ben Casselman reports on
how one oil town is experiencing a boom.
But as oil prices have soared above $100
per barrel -- and, to nearly everyone's surprise, remained there -- it is
becoming increasingly difficult to find another word to describe this west Texas
desert town's fortunes.
The downtown Petroleum Club is full again. The banks that closed up shop in the 1980s are back, once again writing loans for oil production. Oil companies are racing to drill wells -- there were 200 drilling rigs active in the area at the end of 2007, double the number three years earlier. The only thing stopping companies from expanding even faster is a razor-thin labor market that has pushed wages for common laborers above $20 per hour. The school superintendent is worried about high-schoolers dropping out to take lucrative jobs in the oil patch.
"It's just incredible, the competition
for labor," says Robert Landreth, who runs a small oil-production company
The boom has ripple effects far beyond the oil industry itself. Houses are selling faster than builders can construct them. Hotels are booked up, and five new ones are being built around town. Restaurants are packed, and on weeknights the downtown Wall Street Bar & Grill is full of construction workers swigging cocktails mixed with pricey Grey Goose vodka.
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But nowhere are the effects clearer than in
"A lot of people have been waiting for this for a long, long time," Mayor Wes Perry says.
Yet now that the waiting is over, Midlanders have been more cautious. The Rolls Royce dealership that did a brisk business in the 1970s hasn't returned. The airport is busy, but the planes are Southwest Airlines' 737s, not the Lear jets that spilled off the tarmac and onto the grass during the last boom. Many producers delayed ramping up their drilling, waiting to see if prices returned to earth.
"People were slower to respond to this one," Mr. Landreth says. "It's caught many of us by surprise that it has lasted with the intensity it has."
Such caution is the legacy of the 1980s
bust. Old-timers still remember the October day in 1983 when the First National
Slowly, however, Midlanders are beginning
to believe. Oil producers point to differences in this cycle: Demand is being
driven by industrialization in
Mr. Landreth, who's been in the oil business for more than 30 years, held off drilling new wells last year even as prices skyrocketed. But now he's begun drilling again. "I guess I am coming around to the opinion that $100 oil is here for a while," he says.
A TEMPERED BOOM
Happening: Thanks to surging oil prices, high times have returned to
of Success: Banks that closed in the 1980s are open again, lending to
companies racing to drill wells. Labor is in short supply, and pay is high.
It's Different: Wary from their earlier experience, many residents are more
circumspect about their wealth. Town officials, too, have diversified the local
economy with call centers, manufacturing and other energy ventures that aren't
dependent on oil.
The labor market is even tighter. In the
latest data available, state officials put
Many argue that even if oil prices drop,
Today there's a shortage of rigs and labor, says Larry Oldham, chief executive of Midland-based Parallel Petroleum. But if oil fell, Mr. Oldham says, "you might wake up and have a tremendous surplus of everything, because the economics have changed."
City leaders are preparing for that day,
trying to apply the lessons of the last bust and diversify
The city is taking advantage of a full war
chest -- generated by sales-tax receipts that are up nearly 11% from last year,
rising for 57 consecutive months -- and its residents' fat wallets to finance
improvements. The hospital is raising money for a $140 million expansion, and
Seize the Day
Leading the charge is Mayor Perry, a
Midland native raised in the oil industry by his "land man" father,
who secured drilling leases for oil companies. Mr. Perry grew up watching
"I see the urgency, because I don't know how long we've got," Mayor Perry says.
But not everyone buys the case for diversification. David H. Arrington, the 47-year-old president of Midland-based David H. Arrington Oil & Gas Inc., is part of a new generation that hasn't seen a real bust.
"Being diversified is always
tantalizing and sounds good," says Mr. Arrington. "But
Casselman is a staff reporter in the
Write to Ben Casselman at email@example.com