Saturday, July 7, 2012

The Oil Boom Economy

Marketplace:

Across South Texas, some ranching families being offered more than a million dollars for mineral rights. Several people told me there was a job for anybody who could pass a drug test. Even fast food restaurants are paying $15 an hour. But what happens when the energy companies leave? How long can the Eagleford Shale last?
I put that question to John Pettit, back at the Pearsall General Store.
Pettit: What's the long-term? You hear the estimates. You get the pessimists saying three years, the eternal optimists are saying thirty years. I think it's probably somewhere in between there.
Mike Wilson: You don't want to let short-term greed lead you to long-term problems.
 $15 an hour for fast-food jobs?  These booms just seem crazy to me.  Rush in, spend more than you would need to if the development occurred more slowly, drive down the price of the commodity you are producing because you are producing more than the market currently demands-does this make sense to anybody?  It just seems like a giant market failure.

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