Texas Almanac, 1988-1989 Page: 46
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46 TEXAS ALMANAC 1988-1989
Since 1980, tremendous job losses have been recorded
in manufacturing in every Gulf Coast metropolitan
area. In Beaumont-Port Arthur and Houston, nearly 40
percent of the manufacturing jobs have disappeared. In
fact, the degree of contraction in Gulf Coast heavy in-
dustry far surpasses the experience of the Great Lakes
region during the 1970s when large layoffs occurred in
the automobile, steel, and rubber and tire industries.
The bulk of manufacturing employment losses in
recent years has occurred in high-wage industries such
as refining, chemicals, shipbuilding and metal
fabrication.
Consequently, billions of dollars of purchasing pow-
er has been withdrawn from the regional economy. As
Table 3 illustrates, average annual pay along the upper
Texas Gulf Coast remains quite high. But many fewer
workers are employed at these high wage rates as com-
pared to five or six years ago.
Structural Change in the
Oil Field and its Impact on the
Texas Gulf Coast Economy
Over the past six years, the Texas economy has di-
versified and restructured, though this diversification
has occurred principally because of a sharp contraction
in mining and manufacturing. Since 1981, Texas has lost
nearly 234,000 jobs in these sectors, due mainly to the
beleaguered energy industry. Employment in the pri-
mary and fabricated metals industries has declined at
average annual rates of 8.6 percent and 4.8 percent re-
spectively since 1981, while the oil-field equipment in-
dustry has lost jobs at the rate of 13.1 percent per year.
As indicated above, a disproportionate share of these
job losses has been recorded along the Texas Gulf
Coast.
Texas' energy dependence has two important di-
mensions. First, nearly all of Texas' mining and much
of the state's durable-goods manufacturing is highly
sensitive to fluctuations in the price of oil. Second, a
significant portion of non-durable manufacturing is
concentrated in petroleum refining and petrochemi-
cals. Both components of the energy sector-produc-
tion and processing-are in the throes of structural
change, and the effects are being felt across Texas and
especially in the Gulf Coast.
In 1981, the price of a barrel of West Texas Interme-
diate (WTI) stood at roughly S35, and most energy
economists were predicting even higher prices by mid-
decade. But $35 oil encouraged exploration and drilling
activity to an unprecedented degree, both in Texas and
throughout the non-OPEC world. Very quickly, the
world's energy "problem" became one of oversupply
and not scarcity. North Sea producers in particular-
the United Kingdom, Netherlands and Norway-began
in late-1981 to flood world markets with comparatively
inexpensive crude oil, effectively undercutting the
OPEC cartel's, posted price of $35 per barrel.
Since 1981, oil prices have been on a roller-coaster
ride, but the overall trend has been downward, so that
in 1986 oil prices averaged only $15 per barrel. Lower
prices have forced many small and independent pro-
ducers to cut back drastically, and the demand for drill-
ing equipment has plummeted. To illustrate, in 1981 the
number of active drilling rigs in Texas topped 1,300. In
May 1987, the rig count stood at a mere 265.
Particularly hard hit by failing oil prices have been
the state's primary and fabricated metal, non-electri-
cal machinery and shipbuilding industries, which pro-
duce pipe and valve, oil field machinery and drillingRefineries along the Gulf Coast were among the victims of
the drop in oil prices in the mid-1980s. Dallas Morning
News Photo.
rigs for the oil companies. These industries dominate
the Gulf Coast region and have been double whammied
by declining demand and import competition from
drilling equipment manufacturers in Europe and ship-
builders in Taiwan and Korea.
Equally strong forces are transforming the Texas
Gulf Coast refiners and petrochemical processors, who
account for a substantial proportion of the state's non-
durable manufacturing and industrial construction em-
ployment. In 1980, for example, there were 56 active
refineries in Texas with a combined capacity of nearly5
million barrels per calendar day (B/CD) (see Table 4).
By 1985, the number of active refineries had fallen to35,
and capacity had been reduced by nearly 20 percent to
just under 4 million B/CD. Naturally, refinery closures
and capacity reductions have meant substantial layoffs
of refinery workers, and refinery construction activity
has diminished to small, periodic maintenance and
turnarounds.
Other forces are also at work to restructure Texas'
refining and petrochemical sectors and, concomitant-
ly, the Gulf Coast region. Recent mergers and acquisi-
tions among the major oil companies are being accom-
panied by the disposition of refinery assets, either to
satisfy legal requirements or to raise cash to reduce
debt burdens. It is also becoming cheaper to buy re-
fined products and bulk petrochemicals abroad thanto
produce them domestically.
Within the context of declining mining and manu
facturing employment statewide, the current wave 0of
structural change in Texas is being followed by a trans-
fer of vitality and power between two very distinct re-
gional economies: North Central Texas, comprising
largely the Dallas-Fort Worth metropolitan area, and
the Gulf Coast. The former is characterized by a com-Table 2
Texas Gulf Coast Metropolitan Areas
Employment Changes, 1980-87Employment (000) Percentage
Feb. Change
1980 1984 1987 1980-87
Total Total Total Total
Non-Ag. Mfg. Non-Ag.( Mfg. Non-Ag. Mfg. Non-Ag. Mtg.
Beaumont-Port Arthur ............. 148.7 38.5 141.0 30.5 127.2 24.1 -14.4% -37.4%
Houston ......................... 1,439.3j 240.2 1,539.7 197.2 1,371.9 147.5 -4.7 -38.6
Galveston-Texas City ............... 70.3 11.4 72.0 10.1 69.2 9.0 -1.6 -21.1
Victoria ......................... 27.1 3.5 28.4 2.9 27.9 3.01 3.0 -14.3
Corpus Christi ................... . 124.7 16.1 131.0 14.7 128.1 11.8 2.7 -26.7
Source: Texas Employment Commission.
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Texas Almanac, 1988-1989, book, 1987; Dallas, Texas. (https://texashistory.unt.edu/ark:/67531/metapth113819/m1/49/: accessed April 24, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting Texas State Historical Association.