'Kings When It's Good': Oklahoma Braces For Possible Crude Crash
The sign on the front door of Pecan Creek Catering in New Cordell, Okla., may say closed, but this kitchen is open for business. It used to be a cafe, but owner Chad Igo closed the restaurant years ago to focus on catering exclusively to the oil industry.
"We're kings when it's good. They love us. But as soon as it gets tight, we're the first one to get cut," he says.
Igo knows that on-site dining in the oil patch is a luxury — and the recent drop in oil prices has slowed not only the energy industry in Oklahoma but also potentially the businesses that cater to it. Some energy companies are slashing spending and idling rigs.
Igo hasn't heard of any large-scale layoffs, but workers in Oklahoma's oil fields are anxiously waiting for layoffs, more bad news, or, hopefully, the price of oil to go back up.
"I mean, $40-a-barrel oil? It's going to shut everything. I mean, it's going to. They won't do it. It's going to catch up sooner or later. They will shut down," Igo says.
Oklahoma Gov. Mary Fallin says she hopes the cheap oil is just a blip — not a bust.
"We're hoping that this will be a temporary, short-term drop in the price of a barrel of oil. But that's hard to predict, so we're being cautiously optimistic in planning that there might be a potential slump in the economy," she says.
Fallin and other lawmakers are warning state agencies that low oil prices could stall the state economy. The crash could deepen a $300 million state budget gap.
"The oil and gas industry is by far the largest single source of tax revenue to the state," says Mark Snead, an economist and president of RegionTrack, which provides economic forecasting for state finance officials. He's telling lawmakers to build their budget with $60-a-barrel oil in mind.
"The share of earnings of workers in the state from oil and gas is actually slightly higher today than it was in 1982," Snead says.
The 1980s oil boom and the devastating bust that followed lingers in many Oklahomans' minds. The industry recovered, reaching $130 per oil barrel in 2008; that helped insulate the state from the worst effects of the Great Recession. Those record prices plunged in 2009 but again recovered until recently.
In New Cordell, Okla. — commonly known as Cordell — Pecan Creek Catering grosses about $1 million a year and employs about a dozen people. Those are big numbers for a town with less than 3,000 people.
"Last year we dumped $300,000 worth of payroll into Cordell, America. And that's something we're proud of. I mean, because it's a small town," Igo says.
For now, Pecan Creek is holding steady. Igo is confident because he, like many Oklahomans who depend on the energy industry, survived the last crude crash. But this time around, Igo has a fallback. He bought a building down the road just in case he has to stop catering to the oil field and get back in the restaurant business.
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Transcript
DAVID GREENE, HOST:
And let's move from New Orleans to Oklahoma. There, and in other big-energy states, folks hope this slide in prices is a blip and not a bust. Joe Wertz of member station KOSU reports.
JOE WERTZ, BYLINE: The sign on the front door says closed, but this kitchen is open for business. Pecan Creek used to be a cafe, but owner Chad Igo closed the restaurant years ago to focus on catering exclusively to the oil industry.
CHAD IGO: We do everything from steak, prime rib, catfish, all the way down to barbecue brisket.
WERTZ: But Igo knows that on-site dining in the oil patch is a luxury.
IGO: We're kings when it's good. They love us. But as soon as it gets tight, we're the first ones to get cut.
WERTZ: Some energy companies are slashing spending and idling rigs. Igo hasn't heard of any large-scale layoffs, but the oil field is anxiously waiting.
IGO: Again, we're nervous. We don't know. I mean, $40-a-barrel oil? It's going to shut everything. I mean, it's going to. They won't do it. I mean, it's going to catch up sooner or later. They will shut down.
GOVERNOR MARY FALLIN: We're hoping that this will be a temporary, short-term drop in the price of a barrel of oil. But that's hard to predict, so we're being cautiously optimistic in planning that there might be a potential slump in the economy.
WERTZ: Governor Mary Fallin and other lawmakers are warning state agencies that low oil prices could stall the state economy. The crash could deepen a $300 million state budget gap.
MARK SNEAD: The oil and gas industry is by far the largest single source of tax revenue to the state.
WERTZ: Mark Snead is an economist and the president of RegionTrack, which provides economic forecasting for state finance officials. He's telling lawmakers to build their budget with $60-a-barrel oil in mind.
SNEAD: The share of earnings of workers in the state from oil and gas is actually slightly higher today than it was in 1982.
WERTZ: The 1980s oil boom and the devastating bust that followed lingers in many Oklahomans' minds. The industry recovered, and $130-a-barrel oil helped insulate the state from the worst effects of the Great Recession. Those record prices plunged in 2009, but again recovered until recently.
JENNIFER ETRIS: Well, I cheat.
WERTZ: Back in the Pecan Creek kitchen in the Western Oklahoma oil patch, Jennifer Etris is mixing up gallons of her signature condiment.
ETRIS: I use two - two of these ranch dressing mixes instead of one. It's known all over the world, my ranch dressing.
WERTZ: By the end of the week it'll disappear into the stomachs of hungry roughnecks, frack crews, truck drivers and tool-pushers. The catering company grosses about a million dollars a year and employs about a dozen people. Those are big numbers for a town with less than 3,000 people.
IGO: Last year we dumped $300,000 worth of payroll into Cordell, America. And that's something we're proud of. I mean, because we're - it's a small town.
WERTZ: For now, Pecan Creek is holding steady. Igo is confident because he, like many Oklahomans who depend on the energy industry, survived the last crude crash. But this time around Igo has a fallback. He bought a building down the road just in case he has to stop catering to the oilfield and get back in the restaurant business. For NPR News, I'm Joe Wertz in Oklahoma City. Transcript provided by NPR, Copyright NPR.
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