Oil’s price per barrel may have finally hit rock bottom, but Louisiana’s clown car of an economy could shift from reverse to neutral and even drive in the near future.
Our state’s largest asset in its economic portfolio is the revenue it gets from producing and exporting crude oil.
When oil is selling for a high profit and quickly, money flushes this state.
The oil revenue secures teacher’s pensions, and the Legislature can use the extra money to decrease residents’ tax burden. An oil boom is the time to be alive, and Louisiana rolls on like a Mardi Gras parade: noisy, with grandeur and slightly behind schedule.
The reverse is not pretty.
Plummeting oil revenue holds the state hostage. It slashes the state’s budgets and services in half.
Proclamations of the sky falling become scarily mundane, and the budget is slashed to its bare bones. Just look at what’s going on in Baton Rouge right now. Industry leaders and lobbyists flood the Capitol to ensure their tax credits withstand any of the hard decisions our elected officials must make.
We’re living this nightmare now, and we shall remain here until either this state is able to diversify its economy or oil prices rebound.
On one of those fronts, change may be on the horizon.
The oil market is global with moving and interlocking parts. The actions in one part of the world can have monumental impacts in others.
“OPEC. Saudi Arabia, Russia and other producers agreed to a tentative deal on February 17 to freeze output,” CNN reported.
If we are to believe economic indicators, and the smoke is indeed pointing toward fire, oil prices might have finally reached its lowest point. As a senior analyst at the International Energy Agency noted, “Global oil prices appear to have bottomed out,” and Louisiana may see more prosperous days.
This complicated web of interlocking parts is why the market finally reached what some speculators deem the floor price.
If the price per barrell did actually reach its economic floor and can’t decrease anymore, Then its only option is to either level out or increase. Either way, oil workers don’t have to worry about any more layoffs.
The only thing standing between us and a stable oil economy is Iran.
Their oil minister released a statement after reaching the tentative deal, belittling it as “a joke.” He furthermore stated Iran will indeed ramp up its oil production because of the recently lifted sanctions.
Iran’s action will flood the market with unnecessary product, undercutting any positive gains from the stoppage.
Living in the globalized economy, we should have expected this consequence because of the Nuclear Deal.
Louisiana’s prospects will hopefully find better footing once the markets stabilize. Will oil ever reach $100 per barrel? Maybe not. However, we will hopefully never see or hear about the terribly low price of $26 per barrel again.
Garrett Hines is a 21-year-old political science senior from Monroe, Louisiana.