The Forgotten Shale Boom Towns
2008 was a bad year. The economic recession was the worst since the Great Depression, and many people thought it would take the economy a decade or more to recover. It hasn’t. The US economy has come back faster than nearly anyone thought it could in the days after the collapse of Lehman Brothers, a firm that had been around for more than 150 years and survived the Civil War, two world wars, and the original Great Depression.
Today, US economic growth may not be at the same level it was in the halcyon days of the 80’s and 90’s, but compared to the rest of the world, the US is a model of economic performance. Nearly every other major economy on the planet is either slowing down hard, or standing still. The US economy isn’t. And one major reason for that is North Dakota… and Texas… and Oklahoma, Pennsylvania, Louisiana, and the rest of the states that were behind the renewal of the onshore oil industry in the US. The truth of the matter is that the US owes a great debt to shale oil and fracking.
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Without the economic outperformance of shale oil and gas from the Bakken to the Marcellus, the US would be in much worse shape than it is today. Unfortunately, shale oil has been largely betrayed by an ungrateful Washington DC, which has hammered the idea of increased fossil fuel production, and done precious little to help shale oil producers make the necessary changes to their business model to adapt to lower oil prices.
North Dakota, and Williston in particular, reflect this reality. Williston boomed as shale oil production became mainstream, going from a town of 12,000 to a town of more than 40,000 at its peak. Today the situation In Williston is very differentand much less rosy. Williston’s place at the heart of a new American gold rush, with virtually no unemployment and household incomes above $80K a year, set the stage for renewed optimism after the 2008 Recession. The change in North Dakota’s economy was so remarkable that, for what might be the first time ever, last year Hollywood actually made a scripted (and underrated) TV series about oil. Reflecting enormous irony, that series was cancelled at the end of its first season.
Shale Boom Towns- today
across the oil patch which is leading to severe distress for many related service businesses like hotels and restaurants. The bust is also putting enormous pressure on North Dakota’s budget. Some experts suggest that North Dakota is the quintessential boom-bust story. With little in the way of economic infrastructure in much of the Bakken region before the boom, there is little to support the region now after the bust. In that regard, many of the businesses that have opened in the area may have little prospect of ever recouping the capital they put into opening up shop if they haven’t done so already.
Williston is pressing forward with a new $1B five year infrastructure plan including a $250M airport. Those projects are quite risky though. If things don’t improve, much of that money may end up being a waste in the end. While breakeven prices across the Bakken are as low as $35 a barrel right now, that’s largely because the best sites are the ones being drilled at present. Once those sites run dry – which won’t take long as is typical in fracked wells – oil prices will need to be much higher before producers can justify investing more capital in new wells.
Shale Boom Towns – help
America owes a debt to places like Williston which helped provide much needed economic support after the Great Recession. Perhaps nothing can be done to truly help boom towns like Williston – no one really has control over oil prices after all. But some actions like approving and expediting the building of new pipelines to carry crude from the Bakken to Cushing would certainly be a good start, and would be fitting way for the US to repay the debt it owes to the shale oil industry.
Michael McDonald of Oilprice.com