BY JOHN COX The Bakersfield Californian email@example.com
Local business and government leaders got a close look Wednesday at the cracks forming in Kern County’s economy as a result of drought and sharply lower oil prices. At the 15th Annual Economic Summit that was much less optimistic than in recent years, economists and local specialists predicted substantial reductions in the county’s agricultural output and continuing pain in its oil fields. Either situation could improve independently of local efforts. But short of sudden snowstorms or international unrest to lift petroleum markets, a Cal State Bakersfield economist said Kern stands to lose 7,000 jobs in oil, ag and related industries.
“It looks to us like 2015 equals 2013” in terms of overall employment, CSUB economist Mark Evans told a large gathering at the Kern County Economic Summit. He forecast the county’s jobless rate would climb this year to about 11.8 percent from 2014’s average of 10.4 percent.
A panel of local water experts warned that the amount of agricultural land now in production in Kern could shrink by a fifth because of water expenses driven higher by the drought. Such a reduction would cost the county some 12,400 farm jobs and $631 million per year in income to growers. Panelist Jon Parker, manager of the Kern Water Bank Authority, expressed hope that local oil producers could help by expanding the amount of “produced water” — the salty fluid that comes up from the ground along with oil — that gets blended with freshwater or is otherwise treated and used to irrigate crops. He called such expansion “possible, but it isn’t a total solution.”
Lois Henry, the panel’s moderator and a columnist at The Californian, said local growers may soon be forced to rethink not only what they grow, and how much, but whether to farm at all. “At the end of the day, the question comes down to … what are we going to look like agriculturally?” she said.
Bakersfield oilman Gene Voiland opened his explanation of what’s going on in the industry with a disclaimer: He doesn’t know where barrel prices are headed next after falling by about 50 percent between June and January. That said, he predicted a wave of consolidations as some oil producers call it quits and others see lower business valuations as an opportunity to grow through acquisitions. Through the current uncertainty run several “wild cards,” he said, including politics, regulation and transportation. Each has the potential to make production harder or easier locally, he explained. Consumers, Voiland advised, should react to the low oil prices by saving money or even splurging. “If you want to go to Europe, go to Europe,” he said. But oil producers need to spend the downturn focusing on shoring up their finances, avoiding layoffs whenever possible because of the problems that rehiring creates, and learning to “live with” low prices. “Hope for an oil price recovery, but you can’t count on it,” he said.
Voiland, the only oil industry representative to take the podium Wednesday, said “substantial” oil activity continues locally at the current level of about $50 per barrel. The difference is that little reinvestment will take place until prices recover — and he declined to say when that might happen or what it might look like. “Will it go to $100 (per barrel)?” he asked. “Who knows. The market is saying $70, $75.”
Perhaps the summit’s brightest news was voiced by a North Carolina-based economist, Sarah House, who is vice president at Wells Fargo Securities LLC. She said the United States looks positioned to “stand alone” amid international weakness and stagnation. Although the recent decrease in oil and gas capital expenditures has had a big effect, she said, government and consumer spending is providing a welcome boost.
In the third quarter of this year, the national labor market will probably improve to about 5 percent unemployment — the equivalent of “full employment,” she said. House said wage growth, a factor that has largely gone missing through the national economic recovery, will also begin to pick up later this year.