|Glenn Hegar, Clueless Comptroller|
That said I don't think they will, at least not significantly. I provided some explainer there and I'll add a bit here.
I don't expect Iran to get much more involved in Yemen. If Iran does torpedo the nuclear fuel deal, it's already under sanctions; additional sanctions won't drive oil prices much higher. And, ISIS will probably peak before the second quarter is done.
And, there's more proof of that on April 1, with no jokes attached. As a result, oil prices have sagged again.
(Update, April 2: It appears "movement" has happened on Iran nuclear talks. That's probably worth a $1/bbl cut right there. At a minimum, sanctions against Iran won't get any stiffer. And, if progress continues in advance of the June 30 final deadline, the P5+1 might slightly relax, at least, some of the sanctions. And, as Chris Tomlinson notes, Iran-Saudi Arabia tussles could lead the Saudis to pump even more.)
So, with foreign disturbances likely to be of little import, what happens? Probably they stay flat, or trade in a narrow range. If you agree, or disagree, you can let me and readers know with your vote in the poll at right.
I'm not so much a catastrophist to think they fall below $40/bbl, though I do offer that as a voting option in my poll at right, and offer more options, and narrower ranges, than I did in my first quarter poll. I do also think that the "narrow range" will be, in general $40-$50/bbl, and that, barring me being wrong on foreign policy predictions, West Texas Intermediate ends the second quarter at or below $50/bbl.
Now, what's that mean for Texas?
Not good news.
New Comptroller Glenn Hegar, aka Scrooge McOilDuck here and Jethro Bodine at friend Perry's site, has yet to create fake environmental protection plans, unlike his predecessor, Susan Combs, but he seems just as wedded to the oil patch as her, combined with being even less willing to face reality.
First, his budget revenue estimate given at the start of the legislative session, which he has refused to revise since then, in the face of plenty of evidence to the contrary of his ideas, thinks that WTI will hit $65/bbl in fiscal 2016. That link is also very good as an explainer of how state money from the oil patch gets distributed into different pockets. Click it and get a look-see.
Meanwhile, back to Scrooge McOilDuck and his Reaganesque "rosy scenario."
Even in calendar year 2016, which starts next January, that wouldn't be likely. Given that for Texas, like the federal government, fiscal 2016 actually starts in October of this year, it's very, very unlikely. And, given that $60/bbl is, seemingly, the magic production cost number for shale drillers to start new wells, rather than complete and cap for later supply wells already underway, that means little new drilling in fiscal 2016.
In short, per that link just above, Hegar's likely to be half a billion dollars short in his estimates.
I don't know whether he's just clueless, unconsciously delusional, willfully self-delusional, a believer in a state level of trickle-down economics (possible indeed), or a Kloset Kommie Keynesian economics believer (state budgets have to be balanced, Glenn, Keynesianism doesn't work here), but the state of Texas will be hurting indeed, between Dan Patrick's slash-and-burn tax cuts and Hegar's misestimating oil revenues.
And, per Twitter, I'm not alone in concerns. Even at least one member of the Lege is asking questions:
.@RepJohnOtto replies that he understands some are concerned over whether @Glenn_Hegar's revenue estimate will hold up. #txbudget
— Bob Garrett (@RobertTGarrett) March 31, 2015
But Otto's level of concern apparently isn't strong enough for all:
.@RepMattSchaefer asks House chief budget writer @RepJohnOtto why DPS trooper overtime, new aircraft for DPS aren't in #txbudget. #txlege
— Bob Garrett (@RobertTGarrett) March 31, 2015
Stand by for news!
As identifiers, Otto is chair of House Appropriations; Schaefer is a member of Defense/Veterans and Urban Affairs.
And, it's not just oil revenues themselves, as this piece makes clear. A sustained dropoff in drilling affects other businesses, and many of them in, or associated with, the oil patch, expect this slump to last six months or longer. That means fewer truck drivers in the fields, at least a few. It means fewer sales by fishing tools companies and their like, fewer drilling rig leases, fewer semi sales, fewer pickup sales and more.
The link near the top, about a renewed sag, also notes that oil companies in Texas have announced new layoffs; it also notes that part of the manufacturing decline in the state is due to fewer O&G orders. Meanwhile, Moody's agrees that demand for oilfield services will continue to drop.
One should also take note that, per that piece, a few oil-related bidnessmen ARE more catastrophic than I am, and expect the $40 floor to be broken.
It's arguable that if oil commodities speculators are placing massive bad bets, and storage fills to the brim, sub-$40 oil could arrive. But, sub-$35? I doubt it. If nothing else, some speculators will dump sooner rather than later, due to leverage issues. Anyway, feel free to cast your vote in the poll at right. (Given that the Bloomberg author in question probably has never been near an oilfield in his life, and said that fracking was specifically part of horizontal drilling in another piece, I'm taking his $20/bbl claims with a grain or four of salt.)
In either case, on fiscal issues, just like on teh gay and other social issues, it's clear that several dozen clown cars drove up to the Texas Capitol in January, all fully loaded.
I can't wait for the 2016 special session their idiocy will almost surely foist upon us. (Sidebar: This is why, even if Texans are so allergic to government as to oppose a full-time legislature for a state of more than 25 million people,it should at a minimum have its part-time lege meet every year.)