Paper Example on Importance of Oil and Gas Industry for Texas Economy

Introduction

The oil and gas industry is the main anchor for Texas economy and helps create jobs (Gullo & Kerr, 2018). The unemployment rate was high in 2013 compared to succeeding years as evidenced by the statistics above. During this period the oil and gas prices were low affecting the economic growth and subsequently the employment rate. The increased employment rate since 2013 is as a result of substantial strong performance of the oil industry which has benefited with 3-digit oil prices and the implementation of new technology that has facilitated unlocking the oil shale formations which had in the previous past been inaccessible Perryman, M. R. (2016).

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The oil prices play a significant role in determining the unemployment rate in Texas. According to Perryman (2016) in recent times it has become legal to export crude oil from the US and Texas as a primary oil-producing state has benefited from the export business. Perryman (2016) states that according to a research by Perryman Group indicates expansion in Texas output with a forecasted 4.15% annual growth to 2020.the survey also forecasts an addition of 1.3 million new jobs in Texas over the next five years and a compounded annual rate of 2.12 growth rate. Also looking at the retail real sales, expansion is forecasted to happen at an annual pace of 2.12 percent (Perryman, 2016). This is an indication that the oil prices which also encourage the export activity as a source of revenue will encourage retail jobs in Texas implying that the unemployment rate is reduced significantly. The oil prices have been on the increase due to a continued rise in the global supply and demand for the commodity (Webber, 2018). For states like Texas, the increase in oil prices due to international market forces increases the production rate for oil which implies more jobs being created (Webber, 2018).

The industry generates revenue for the government generating approximately $13.8 billion and $15.7 billion in 2015 and 2014 respectively (Gullo & Kerr, 2018). In a recent study, the oil and gas industry in Texas has indicated renewed growth after years of commodity prices that had led to a downturn in the economy (Asco, 2018). During the downturn when the oil and gas prices had reduced, Texas as one of the leading states in terms of job gains approximated to 400000 a year during the oil rise, there was a sharp decline in 2015 when the oil prices surfaced and the job gains in Texas reduced significantly to 165000 a year which is even below the national average rate which increased the unemployment rate in Texas (Perryman, 2017). It's evident that the Texas unemployment rate is correlated with the economy's health determinant which is the performance of the oil and gas industry as the pillar of the economy. In 2013 the oil and gas industry in Texas was at a record low and with the industry doing better now it has opened up so many more job opportunities reducing the unemployment rate. In general, the oil and gas industry is correlated with the unemployment rate.

According to Asco (2018), total employment created by the oil and gas industry in 2017 was 832777 jobs which translated to averaged annual wage amounting to $110000. In specific for Texas, there were 325439 direct jobs created in all sectors and supported by the oil and gas industry. Texas economy will continue to reveal growth with continued innovation and operational efficiencies in the oil and gas industry. Increase in employment positions is evident in the fastest growing industry in Texas.

According to Gullo and Kerr (2018), the Texas economy continues to reap benefits from the oil and gas industry with oil prices above $60 per barrel and that there are increased exports recorded. According to Perryman (2017), Texas has created more jobs compared to other states and there has been a rapid expansion of the workforce due to demographic where there is a growing number of young talents in the job market and the fact that there is the migration of people searching for better opportunities in Texas. With the unemployment as a measure of the unemployed people in the workforce and expressed as a percentage, it implies that with the increase in the workforce and the same rate increase in the job creation, then the unemployment rate should be relatively stable.

Conclusion

Unemployment in Texas has been on the decline over the past five years and as evident from the economic analysis the long run unemployment rate has fallen from 6.04% to the current 4%. However, the unemployment rate despite showing the decreasing trend remains higher than that of the nation as a whole. The economic analysis on Texas oil and gas prices and their relationship indicate that the change in crude oil prices affects some macroeconomic variables such as unemployment. in our analysis, it's evident that the oil and gas prices which are the significant determinants of the Texas economy influence the unemployment rate. We conclude that there is a correlation between the unemployment rate and the oil and gas prices in Texas holding other contributing factors to the economic growth constant.

References

Asco. (2018, May). Texas oil and gas industry poised for growth, but challenges remain [Opinion]. Retrieved from https://www.houstonchronicle.com/opinion/outlook/article/Texas-oil-and-gas-industry-poised-for-growth-but-12955962.php

Feather, N. T. (2012). The psychological impact of unemployment. Springer Science & Business Media.

Gullo, S., & Kerr, E. (2018). Thriving Texas Economy Expands Broadly. Retrieved from https://www.dallasfed.org/research/update/reg/2018/1801

OECD. (2018). Unemployment - the Unemployment rate - OECD Data. Retrieved from https://data.oecd.org/unemp/unemployment-rate.htm

Parker, R. (2018, January 20). Opinion | Why Texas Is No Longer Feeling Miraculous. Retrieved from https://www.nytimes.com/2017/09/22/opinion/sunday/texas-unemployment-businesses.html

Perryman, M. R. (2016). The Texas Economy: Past Performance and Future Expectations. Retrieved from https://www.tscpa.org/docs/default-source/default-document-library/texeconmarapril16-(1)

Perryman, M. R. (2017, August 21). Six Reasons Not to be Concerned that the Texas Unemployment Rate is Higher than the US | The Perryman Group. Retrieved from https://www.perrymangroup.com/2017/08/21/six-reasons-not-to-be-concerned-that-the-texas-unemployment-rate-is-higher-than-the-us/

Pigou, A. C. (2013). Theory of unemployment. Routledge.

Shimer, R. (2012). Reassessing the ins and outs of unemployment. Review of Economic Dynamics, 15(2), 127-148.

Statista. (2018). Texas - Unemployment rate 1992-2017 | Timeline. Retrieved from https://www.statista.com/statistics/190726/unemployment-rate-in-texas-since-1992/

Webber, M. (2018, August 15). What Higher Gas Prices Mean For Texans This Summer - UT News. Retrieved from https://news.utexas.edu/2018/06/05/what-higher-gas-prices-mean-for-texans-this-summer/