Hidden cost of an impressive project: Permian Basing Oil boom creates labor shortage in Texas.
While some Permian Basin workers get 100 percent pay raises, surrounding towns face unbearable labor shortage.
The latest shale drilling boom is driving unemployment to the lowest levels in years in many of the areas that encompass the Permian Basin, a 17-county region that spans West Texas and eastern New Mexico, Nearly all of the workers who want jobs in the Permian’s 17 counties are already employed.
“The latest Permian Basin shale-oil boom is fueling the region and starving it at the same time.” said Jerry Morales, the mayor of Midland, Texas, and proprietor of two local restaurants. Food serving industry is working hard to retain cooks and the local government payroll is 200 employees short of what it needs to fully function.
Sales-tax revenue is hitting a record high, allowing the city to get around to fixing roads, but with no employees to service the economy.
It is sad to see the purchasing ability growing with a view of a lunchtime crowd lined up for Asian salads or hamburgers.
In the country's busiest oil patch, where the rig count has climbed by nearly one third in the past year, drillers, service providers and trucking companies have been recruiting everyone from police officers to grocery clerks.
So many bus drivers with the Ector County Independent School District in nearby Odessa quit for the shale fields while kids are late to class or the carpool line increases every day.
The oil industry has such a ferocious appetite for workers that it'll hire just about anyone with the most basic skills, zipping through a two-week training program at New Mexico Junior College in Hobbs to become a well-pump checker. That's understandable, considering the $28-an-hour one could make is double what one of them was earning until December as a guard at the Lea County Correctional Facility in Hobbs.
However, when the boom ends, as history suggests they all do, shale-extraction businesses won't be able to out-pay most employers anymore, and people would have developed skills and experience with no use in the remaining economy.
Morales estimates that he may ask for raises for city workers, so they don't bolt for the oil fields. But this action could quickly spiral up the effects. Permian Basin would increase wages to attract more workers and the city would have to keep increasing salaries to keep them.
The labor shortage is inflamed by the real-estate market: The supply of homes for sale is the lowest on record, according to the Texas A&M Real Estate Center. The $325,440 average price in Midland is the highest since June 2014, the last time the world saw oil above $100 a barrel. Apartment rents in Midland and Odessa are up by more than a third from a year ago, with the average 863-square-foot unit commanding $1,272 a month.
That's one reason the Ector County Independent School District has more than 100 teaching positions open, said spokesman Mike Adkins. People who move for jobs are stunned by the cost of living. Armin Rashvand's apartment is smaller and costs more than the one he rented in Cleveland before moving last August to run the energy-technology program at Odessa College.
Another shock for him, some of his students, with two-year associate degrees, can make more than he does, with his master's in science, electrical and electronic engineering. At Midland College's oil and gas program, which trains for positions like petroleum-energy technician, enrollment is down about 20 percent from last year. But schools that teach how to pass the test for a CDL -- commercial driver’s license -- are packed.
A CDL is a golden ticket, drivers are employable just about anywhere. Anyone can make a whole lot more money than being a teacher, being a bus driver or waiting tables. Jeremiah Fleming, 30, is on track to pull down $140,000 driving flatbed trucks for Aveda Transportation & Energy Services Inc., hauling rigs.
This situation has been experienced so many times before. Oil prices go up, and energy companies dangle such incredible salaries that restaurants, grocery stores, hotels and other businesses can't compete. People complain about poor service and long lines at McDonald's, Walmart and simple Tex-Mex joints.
As labor remains in short supply, companies are going further afield to find workers and paying them more, increasing production costs and shrinking profit margins. With oil trading between $75 and $80 a barrel, lower unemployment rates in Midland, Odessa and neighboring communities could mean that output in the Permian will slow. Time will tell what happens in the next months.