New brand of oil boom in Texas
Oil is pumped out of the ground behind a home in Odessa, Texas
SCOTT JAGOW: The biggest oil and gas reservoir in the U.S. lies smack in the middle of West Texas. It's called the Permian Basin. The towns closest to the basin are the twin cities of Midland and Odessa. Ever since oil started gushing there in 1923, the people have seen their fortunes rise and fall with the price of oil. So the folks in Midland-Odessa don't mind as much paying three dollars for a gallon of gas. Because as Michael May reports, things haven't been this good for a long time.
MICHAEL MAY: On the sun-baked outskirts of Odessa, a group of roughnecks screw a fuel line into a state-of-the-art oil rig. This small, privately run operation had been in hibernation for decades. Now it's selling rigs faster than it can build them. Still, owner Mike Cowan is more reserved than ecstatic. He's old enough to remember when OPEC drove up oil prices in 1979.
MIKE COWAN:"Jets. Rolexes. I was too young. Money came too quick. I made all the mistakes everybody else made, but I survived it."
Not everyone can say that. In 1986, oil prices dropped from $29 to $8 a barrel. Three-quarters of the local rigs shut down. The First National Bank of Midland collapsed. Cowan sold his jet and his lake house, and started buying oilrigs.
COWAN:"Once I got known as buying repossessed rigs, banks started seeking me out. All over the country. I bought rigs for $100,000 apiece. Just sat on them."
Cowan sold those refurbished rigs for millions, and then started manufacturing new ones. He's not the only local doing well. Sales tax receipts are up 20 percent over last year. But downtown Midland remains a monument to the hubris of the past. It's got more tall office buildings than Texas cities three times its size — and many remain empty. Buddy Sipes is one independent oil producer who's kept his downtown office.
BUDDY SIPES:"I've been through three booms."
Sipes says this one's different. The streets aren't packed with people hoping to get rich quick. There isn't a single Rolls Royce dealership in town.
SIPES:"This time it's been a more measured pace. And you don't find the recklessness."
The major reason for that is there's less oil to extract. And some new extraction techniques are costly, so they depend on oil prices staying high.
SIPES:"If you count on $75 oil, and that's what it takes to make your project economic, I think you're being foolish."
In the old days, Sipes did well betting oil prices would keep rising and he'd lock in the price of his output. Now he feels at the mercy of world events and New York traders that can cause the price of oil to fluctuate wildly.
SIPES:"They're at the nerve center of the world. And we're down here in the backwater. And we find out, for example, that there's a big pipeline in Nigeria that's been blown up. They know it in minutes. And we know it a day or two later and the price is already all over the map."
Sipes just wants to stay out of debt and retire with money. People like him fill the Midland Country Club. There, you can find older men playing golf right in the shadow of an aging oilrig staffed by young novices.
Jerry Arnold is the foreman on this rig. Five years ago, he was in prison. He got out and started working on rigs for around $15 an hour. Then the boom hit and suddenly Arnold found himself making $110,000 a year. And he's spending it.
JERRY ARNOLD:"Got a house, vehicle. Raise my kid, give her things I never had. I got her spoiled. I ain't gonna lie. Blew a whole check on vacation last week. Never got to do that before, you know. It's nice."
People like Arnold know busts follow booms. When he was a kid, his Dad worked on the oil fields.
ARNOLD:"And they were the same way. We was buying a nice house. Boom fell out. Next thing I know, we moved. My nice little nest egg there I had wasn't there no more. But I was just a kid."
That's why there aren't so many young people coming into the profession. And Arnold predicts the bust will be back when President Bush leaves office, or Iraq's oil starts flowing again. But there are job threats closer to home for Arnold. Cowan is building rigs that can be run by two men with joysticks.
This is Michael May for Marketplace.