Why Oil Doesn’t Matter (So Much) Anymore

For Dallas, it’s the great-est story ever told, in 1930, black gold sprang from the gutted ground of East Texas, enriching the city as well as a breed of barons for generations.

Five decades later, another oil story was written-this one with a bleak ending. In 1981, the average price of a barrel shot up to a whopping $31.75, and many thought it would continue to rise to $80. “You saw a lot of flashy, excessive fortunes made then,” says Terry Smith, an operator at Ozark Exploration Inc. of Dallas. “It was a very visible and romantic business.”

Until the inevitable bust. In July 1986, the price of oil sank to $9 a barrel. InterFirst and Republic banks merged, then failed, and officially, Dallas | slumped into a depression.

This year, the price of oil in the fourth quarter will average between $23.50 and $24 a barrel. According to Jim Wicklund, an analyst at Rauscher Pierce Refsnes Inc. of Dallas, that price is the equivalent of $35 a barrel in 1986, and that alone is enough reason to talk boom times.

’The oil industry is certainly the healthiest it’s been in years,” says Ray Perryman of the Perryman Group.

So why isn’t everyone celebrating? Dallas’ now-diverse economy-with 90 percent of its industry classified as “non-oil”-actually improves when the price of oil falls, according to Perryman. “In Dallas, we’re counter to the oil cycle,” he explains. “Everything does well when the price of oil is low.”

“Everything” refers to the thickest slices of Dallas’ current economic pie. which includes communications, manufacturing and the giant service industries like healthcare that need to purchase energy and therefore prosper when oil is cheaper. “Dallas has much more at stake in how the world develops its telephone operations than a $4 or $5 swing in the price of oil.” says Perryman.

Similarly, the energy industry does not play the influential role in the Texas economy it once did. According to Gary Preuss, an economist in the State Comptroller’s office, oil and gas represented 25 percent of Texas’ economy in 1981; now that portion is closer to 10 percent. The Federal Reserve Bank of Dallas confirms that in 1982, about 25,000 people were employed in Dallas’ mineral extraction industries. That number has since dwindled to about 11,000, or 0.6 percent of Dallas’ employment pool.

“Dallas is surely not as

dependent on oil as it used to be.” says Smith-over the whinings of J.R. Ewing’s final temper tantrum. “Although we are active, it just doesn’t affect Dallas the way it used to.”