A Pain Deep in the Heart of Texas

By Barbara Rudolph

It seemed as if the good times would go on forever. As the price of fuel soared through the 1970s, the economies of oil-rich regions, from Texas and Oklahoma to Wyoming and Alaska, exploded. The frantic growth fed on itself: in Tulsa, Houston and Denver, skylines seemed to sprout overnight. The new wealth was intoxicating, making giddy millionaires out of young geologists, and inspiring dentists to become oil barons. Says Texas Historian T.R. Fehrenbach: "Oil was a big hot flash of money."

Now that powerful flash is but a weak flicker. The fallout from collapsing energy prices can be seen throughout the oil patch: in empty office towers, foreclosed homes, shuttered stores and the swelling ranks of unemployed. Auctions of everything from furniture to oil-field equipment are increasingly common. Banks are saddled with sour energy loans, and state governments are strapped for funds. In Texas, for example, each $1-per-bbl. drop in oil prices means a loss of 25,000 jobs and $100 million worth of state revenues.

Houston, once proclaimed to be the shining buckle of the Sunbelt, has particularly suffered from the pervasive effects of the oil slump. Some 16,600 mortgages were foreclosed last year, more than the previous two years combined, and the pace is quickening. February brought nearly 3,000 foreclosures. Fully 29% of the city's office space sits empty.

There are signs, both serious and frivolous, that the good life is not what it used to be. Rolls-Royce and Mercedes automobiles are appearing in used-car lots. In boom times, the skies over Houston during rush hour were filled with helicopters ferrying executives; today the choppers are a rare sight. Last week, in an effort to cheer its customers, the tony La Colombe d'Or restaurant offered a four-course lunch pegged to the price of a barrel of oil.

Unemployment is rising inexorably throughout the oil patch. Louisiana's 13.2% jobless rate is the highest in the U.S. Last week 600 workers turned up at a Marathon Petroleum plant in Garyville, La., responding to the company's advertisement to fill five jobs. In Texas, where the unemployment rate has reached 8.4%, Paul Rogers six weeks ago lost his job as an oil pipe fitter. Says he: "I'm 21 years old and have 44 years of this left. What will I be, a bum?"

Oklahoma has a 7.8% unemployment rate, and last month's annual state fair in the town of Ada attracted a record 9,800 job seekers, more than double last year's turnout. Phillips Petroleum, based in Bartlesville, Okla., last week said that it will soon lay off between 2,000 and 2,500 employees, up to 9.4% of its total work force. Says Kerry Malone, editor of an Oklahoma oil-industry publication: "No one is jumping out of windows yet, but they're looking at the ledges."

The region's financial institutions are increasingly vulnerable to plummeting energy prices. In Wyoming, eight banks failed in the past 2 1/2 years. At the ten largest Texas bank holding companies, energy credits make up about 11% of total loans. As a result, more and more banks are bolstering their reserves against possible future losses. Last week MCorp, the second- largest bank in Texas, announced that it was increasing its loan-loss reserve by about $215 million. First Oklahoma said that it would set aside $27 million.

State and city treasuries are not in much better fiscal shape, since revenues from taxes on energy production are falling dramatically. In Alaska, where oil-related businesses account for about 85% of all economic activity, experts project a $1 billion shortfall in the state's budget by June 1987. The government last week proposed cutting $120 million from operating expenses. Both Texas and Louisiana are facing $1 billion deficits. Says Texas Governor Mark White, in a classic understatement: "We can't take oil for granted anymore."

The oil bust is especially hard on the brash boomtowns that flourished in the early 1980s, when energy prices were peaking. Six years ago, Evanston, Wyo., a dusty town (pop. 1,250) on the Utah border, was dubbed "Oil City, U.S.A." because of its strategic location atop the Overthrust Belt, then a choice location for petroleum exploration. Oil-rig workers earned upwards of $1,000 a week. Recalls Jerry Cazin, 77, who has owned the Cazin & Houtz hardware store in Evanston for 51 years: "People thought they were going to be in clover all their lives." Today the area's wells have stopped pumping, and 12.5% of its residents are out of work.

For those citizens of the oil patch with long memories, boom and bust cycles are as natural as Texas tumbleweeds and summer windstorms. What is different about the current collapse, though, is the speed with which it struck. Says Historian Fehrenbach: "Nothing in the past has come on as fast as this." For the moment, then, people can do little more than hold on, hoping that the cycle will one day turn again.

With reporting by David S. Jackson/Houston and Richard Woodbury/Los Angeles