ODESSA – There’s a bright economic future ahead for the Permian Basin.
But first, residents must get through a few bumps in the road, said Ray Perryman. The economist held his annual five-year economic forecast Thursday at the Odessa Marriott Hotel and Convention Center in an event sponsored by SouthWest Bank.
Perryman is forecasting 6.6 percent annual growth for the Permian Basin region over the next five years, with the Midland metropolitan statistical area forecast to see growth just shy of 6.5 percent. Current positive commodity prices for oil and gas are expected to fuel additional oilfield activity and economic growth.
“The Permian Basin has a very bright future. We are a critical piece of the global economy. We need to educate our folks and show folks we are an important part of the climate solution,” he said.
The challenges facing the Permian Basin economy have to do with demographics and education, Perryman said.
“One of the things that drives the economy is demographics,” he said. “Demographics always matter.”
Texas’ demographics show that the state not only has a lot of young people but a growing pool of young people, meaning the state has a need to educate them. The Permian Basin must meet that standard, he said, pointing out that only 31.6 percent of adults in the Permian Basin are at or above Level 3 literacy. Obtaining the workforce needed in the future will require raising those rates, he said, and investing in education. During the height of the pandemic last spring when schools closed and moved to distance learning, he said 4 to 5 percent of students had no contact with their schools because they lacked access to broadband.
If Texas kept its education levels at current levels, graduation rates and job placement rates at current rates, “if we let demographics do what they do, 15 years from now, the average Texan will have $6,000 less in income. We will be a state without a skilled workforce, a state with financial needs,” he warned.
Another challenge for the Permian Basin is its wealth of energy resources and the controversy around the impact of those resources on the climate.
“We’re going in a direction we don’t need to go” in terms of addressing energy and climate change, he said. “Climate change is real. All we hear about the solutions is not practical. We cannot get there without hydrocarbons. Oil and gas needs to be a partner in addressing climate change”
What the Permian Basin can do and will have to do is produce and use those hydrocarbons cleanly, he said. There are already such efforts underway, he said, pointing to the proposed Nacero refinery near Penwell that will produce gasoline from natural gas.
“It is incumbent upon us to get the message out that we are part of the solution,” Perryman said, because that affects not only the industry being allowed to operate but to access the capital it needs to operate.
Addressing rising concerns about inflation, he acknowledged that the issue is very real but should diminish over time. Supply chain constraints are also an issue, he said. He compared the global economy to a massive engine that had been suddenly shutdown by the pandemic. Restarting that engine requires that the components be greased, and he said that is what’s happening now, and it will take a few months for that engine to fully run again.
“The brilliant thing about humanity is as soon as we create a problem, we create a solution,” Perryman said.
Perryman noted that he has been doing these conferences 38 years and marveled at how things have changed from the first one, primarily in terms of technology and access to information. He added that he has gained a lot of experience and met a lot of people over those 38 years.
“In terms of the economy, Texas was an all-energy economy when I started,” he recounted. “People have begun taking different views of the economy over time.”