Declining oil prices having trickle-down effect on other companies

Declining oil prices having trickle-down effect on other companies

The drastic decline in oil prices is not only hurting Texas' oil companies but also having a trickle-down effect on other companies, the president of Houston-based Lipow Oil Associates Consulting Firm said.

Andrew Lipow said Texas would see more layoffs and slower job growth in the energy industry, as well as lower sales tax revenue from the declining petroleum prices.

However, Lipow could not determine whether the declining oil prices mean the state has gone from boom to bust. He simply said the jury was out on whether that was going to happen.

Speaking on the topic, he added, "But it's not only the oil companies. We have the trickle-down effect to the companies that provide hotel and worker accommodations, to the companies that are providing restaurant and food services to those workers out in the oil fields."

The number of applications for drilling licenses slipped around 25 per cent year-on-year to 1,629 in December 2014. In the corresponding month of 2013, the state had received 2,060 applications for drilling licenses.

Thus, when lawmakers return to Austin later this month for the next legislative session, they might have less money from the "Rainy Day Fund" to dedicate to transportation or other projects.

Oil companies are already cutting capital expenditures and jobs. Last month, the Dallas Federal Reserve warned that declining oil prices could cost the state 125,000 jobs in 2015.

However, some economists noted that Texas is now much more diversified than it was during the last oil bust in the 1980s.