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Permian Basin Oil Workers Face Possible Bust As Global Oil Markets Crash

By Mitch Borden

In West Texas, the Permian Basin is home to America’s largest oil field, where just about everyone depends on the energy industry. But with the spread of the coronavirus pandemic, world markets in flux, and Saudi Arabia and Russia starting a price war over crude — oil prices have plummeted.

Leaving, oil companies in West Texas to scramble to roll back operations while locals are forced to wonder if this is the next big bust.

At 1:30  a.m. on Monday, Gricelda Rubio’s phone rang. Her husband, a drilling rig operator, was calling from out in the field. He had bad news.

“We need to get prepared the oil field just dropped," Rubio remembers her husband telling her over the phone. "I don’t know if we are going to have a job or what’s going to happen.”

This, she said, was heartbreaking. Her husband has lost his job before in a bust, so when Rubio's husband told her that oil prices were falling fast all she could think was, Oh no, not again.”

She lives in Andrews, about an hour north of Odessa, and Rubio only has to worry about herself and her husband. Still — they have bills to pay.

"We live day by day," Rubio said. And without some money saved up, she said "you can’t get through" big downturns like the one facing the Permian Basin.

Oil makes and breaks the region. When the oil market is good, prices on pretty much everything—like rent, food, and services—shoot up. But locals can mostly keep up because salaries across the board shoot up as well.

When oil crashes though — a lot of people are left in the dust. 

That's the position Clayton Dement finds himself in. The 22-year-old can't stop thinking about what's going to happen if he loses his job as a safety technician in the oil field.

"If [oil] doesn’t come back from this I’m going to have to sell the truck I just bought," his anxiety is obvious as he describes the thought running through his head, “I’m going to have to take all the money out of my 401k just to pay my rent. I’m going to have to find something else.”

Dement came out to Odessa three years ago to work in the oil patch. He makes good money, about $80,000 annually monitoring poisonous H2S gas on drilling sites. Dement dropped out of college to head out to the Permian Basin and is essentially following in his father's footsteps.

In the 1980s, his dad worked in the West Texas oil fields until one of the region’s worst busts left him unemployed. Decades later, it might be Clayton Dement’s turn to face that reality, but he still has a job—for now.

Dement said he's not alone in wondering what his future looks like.

“You see everybody I’ve talked to, every single one of them, is talking about what they are going to do when it eventually comes out and their company goes out of business"

It seems one of the worst parts of this situation for Dement is he has no way of knowing when or if he’s going to lose his job. In a lot of ways, he's powerless as global oil markets are thrown into crisis.

“I’m nervous. I’m scared. I know people that [already] got laid off and I feel like there’s going to be a whole lot more of that around this area,” said Dement.

And, unfortunately, he is probably right. That's according to Reed Olmstead, a lead oil analyst focusing on North America for IHS Markit.

If Olmstead ran into an oil worker at a bar right now, he said he'd “buy their beers" because that's really the only good news he could give them. Olmstead used to work for a small oil company and had to leave the industry because it was too unpredictable. "This is an unpleasant world we live in. It’s a boom and bust.”

The analyst sees a lot of factors playing into this dramatic downturn. A barrel of West Texas Intermediate started the year around $60 per barrel. This week, it’s around $30. When prices are this low, oil companies can't make money.

"At $30 dollars its hard to make this thing work. At $50 it survives and at $70 it thrives," according to Olmstead .

The analyst isn't officially calling this situation a bust yet. — but he might be soon. IHS Markit projects it could take as long as a year for oil prices to reach a more sustainable level of $40 to $50.

So, as drilling hits a wall in the Permian Basin, thousands will lose their jobs.

“We’re going to see activity come down by 50% in the second half of the year," Olmstead explained.

Some oil companies will go out of business. Others will get taken over by competitors. That, Olmstead said, could set up the Permian for one of the worst downturns in decades. Drilling companies like Parsely Energy and Diamondback have already announced they are scaling back their Permian operations, while the stock prices of companies like Occidental Petroleum and Apache Corporation have dropped by almost 50%.

The best advice Olmstead has for folks in the oil patch right now is to save their money and hunker down, but that’s just not possible for some people at this point.

People like Jay Mercer, are in a bind. He was smoking outside of a gas station near Odessa, watching 18 wheelers drive-by when he explained, “You make so much money out here, you don’t think it’s going to go away."

So when oil busts, a lot of people have to spend their money to make due instead of saving it for a rainy day.

Mercer’s a Marine veteran who served in Afghanistan. He said, after leaving the military, he really found himself when he came to work in the Permian It was hard for him to transition back into civilian life and he really felt at home in the oil patch. He's also making the most money he's ever made in his life working at an oil service company, which lets him dream about his future really for the first time in his life. 

Mercer said if he ends up getting laid off — then he’ll head back to Louisiana to live off his veteran’s disability check until he can find another job.  

“You know the [drilling] rigs are going to start stacking up and people are going to lose their jobs," Mercer said. "It’s no good.”

The one thing the sudden fall of oil prices really shows, Mercer said, is that tomorrow is never guaranteed — especially in the oil field.

Mitch Borden is Permian Basin Reporter & Producer at Marfa Public Radio.