Economy About: Midland-Texas

An Introduction to Midland’s Economy

Midland is located in West Texas in the Permian Basin, one of the most prolific oil producing regions in the United States. As a result, Midland’s economy is heavily dependent on the oil and gas industry.

Many major oil companies have operations centered in Midland, and the city serves as a hub for all upstream, midstream, and downstream oil and gas activities in the Permian Basin.

Key Industries Driving Midland’s Economy

  • Oil and Gas Exploration and Production
  • Oilfield Services
  • Pipeline Transportation
  • Petroleum Refining
  • Manufacturing

The oil and gas industry and its related sectors account for over 50% of jobs in Midland. Major employers in the city include oil companies like EOG Resources, Concho Resources, Pioneer Natural Resources, Chevron, Shell, ExxonMobil, and Occidental Petroleum. The economy rises and falls together with the boom and bust cycles of the oil industry.

The Impact of Oil Prices on Midland’s Economy

As a hub of the Permian Basin oil production, the state of Midland’s economy is heavily correlated with the market price of crude oil. Here’s how oil price swings have impacted Midland’s economy over the past decade:

Era of $100+ Oil – 2009 to 2014

  • Oil boom with rapid economic and jobs growth
  • Unemployment below 3%
  • Strong wage and population growth
  • Strained infrastructure with traffic, housing shortages

2015 Oil Price Collapse

  • Crude fell from $100 to below $30 per barrel
  • Loss of over 25,000 oil jobs in the Permian Basin
  • Midland unemployment spiked above 5%
  • Real estate market crashed over 30%

2018 Rebound and Permian Production Surge

  • Oil rebounds leading to resurgence in drilling activity
  • Midland unemployment back below 3%
  • Housing market boom with 20%+ price inflation
  • Labor shortages with more jobs than workers

Clearly, Midland’s fate moves in tandem with oil prices which drive activity in the Permian Basin upstream, midstream and downstream oil and gas sectors.

Key Jobs Sectors Powering Midland’s Economy

As the urban center serving West Texas’ thriving Permian Basin, these are the industries driving employment and economic growth in Midland:

Oil and Gas Extraction

This sector includes companies doing upstream exploration and drilling activities to produce oil and natural gas. With over 2,000 local companies like EOG Resources, Pioneer Natural Resources, ExxonMobil, Chevron, Shell, Concho Resources, Occidental and Diamondback Energy that have drilling and production operations centered in Midland.

This sector accounts for over 30% of jobs and an even higher share of wages paid out. The Permian Basin produces over 5 million barrels of oil per day, making it one of the most prolific oil regions globally.

Support Activities for Mining

This industry classification includes oilfield services companies that provide critical support activities to aid oil and gas drilling and production. Key companies with bases in Midland include Halliburton, Baker Hughes, Schlumberger, Weatherford International and National Oilwell Varco.

These firms provide well drilling, cementing, stimulation, completions, equipment rental, well testing, construction and engineering services. This complex web of oilfield service companies accounts for around 13% of Midland employment.

Pipeline Transportation

With all the oil and gas production in the Permian Basin centered near Midland, there is massive demand for building oil and gas pipelines to transport these hydrocarbons to markets and refineries. Midland has become the epicenter of Permian pipeline construction and transport with major regional offices for firms like Kinder Morgan, Plains All American, Targa Resources.

ONEOK and Enterprise Products Partners located in the city. This pipeline sector accounts for another 5% of jobs centered in Midland.

Manufacturing & Construction

These sectors also benefit immensely from being centered in the middle of the booming Permian Basin oil production, as there is huge demand for oilfield equipment like pumps, valves, rigs, vessels, pipes, fittings as well as modular plants and other fabricated metal products.

Additionally, the constant waves of expansion in drilling, midstream infrastructure, and people leads to nearly never-ending demand for new commercial and residential construction and home-building around Midland. 3-5% of jobs are centered in manufacturing and construction locally.

Wages, Education and Standard of Living

With the thriving oil industry seeking skilled technical workers combined with periodic shortages of qualified labor during boom times, Midland workers see very strong salary levels along with low unemployment.

Strong Wage Levels

The median household income in Midland is nearly $63,000 – ranking among the top 15% of cities nationwide. Even entry level workers like truck drivers or laborers can earn $50,000+ with overtime. Due to the technical skill requirements and dangers working on drilling sites and pipelines, many blue collar oilfield jobs pay over six figures without requiring higher education.

Lower Educational Attainment

With the ample high paying blue collar jobs offered by the oil industry right out of high school or with associate degrees and technical certificates, educational attainment in Midland lags national levels:

  • 86% have high school diploma (matches US average)
  • Only 23% have bachelor’s degrees (US average is 32%)

So while local wages and standard of living are high due to the thriving oil economy, educational metrics suffer a bit with fewer residents prioritizing college with so many lucrative oilfield jobs readily available.

Real Estate Market Dynamics

The cyclical nature of oil prices leads to dramatic multi-year boom and bust swings in Midland’s local housing market and construction sector. Here’s an overview of key dynamics:

Limited Housing Stock

With all the job growth and influx of oil workers into Midland during boom times when drilling activity accelerates, housing supply becomes very tight leading to spiking rents and home prices along with overwhelmed home builders and a surge in apartment construction.

New Development Lags

With construction crews overwhelmed, new housing developments lag drilling expansions and pipeline capacity – exacerbating the strained housing market and inflating sale prices and rents. There is chronic undersupply of homes.

Bust and Crash

When an inevitable oil crash happens after years of expansion and production gets ahead of global demand, Midland sees many drill rigs laid down and oil projects canceled. Tens of thousands of jobs may disappear practically overnight regionally. The housing market sees demand plunge while supply of new homes remains high, causing a crash with 30%+ price declines not being uncommon. Rental vacancy rates soar.

This boom bust cycle leads to extreme volatility in Midland’s local real estate and construction industries.

Government Policy Impact on Midland’s Economy

As the core of America’s most critical oil producing region, government energy and tax policies have an outsized impact on Midland’s economy. Here are some key areas to understand:

Global Oil Markets

As a globally traded commodity, the price of crude oil and Permian Basin drilling economics are heavily influenced by OPEC supply adjustments along with global demand shifts from recessions, reduced travel, or alternatives like renewable energy sources. Government policies favoring Texas oil production over imported barrels also plays a key role in investment levels.

Regulation on Oil Production

Expanded regulations on drilling, flaring, emissions, and spills increases compliance costs and may slow Permian output growth to Midland’s detriment. Meanwhile looser regulations generally accelerate Permian activity. Fields like the shale oil core Delware Basin have thrived in recent decades aided by loose regulations allowing innovative hydraulic fracturing and horizontal drilling techniques.

Pipeline Infrastructure

Midland’s ability to transport outbound oil/gas production and supply the inbound materials/equipment needed to stoke drilling expansion depends heavily on pipelines. So policy shifts impacting ease of permitting and building pipelines coming in and out of the Permian Basin affect the speed of boom times for Midland’s economy.

Local and Federal Tax Policy

Changes to local property and sales tax rates along with potential state or federal tax increases directly targeting oil producers may impact drilling economics. For example, proposals to raise the oil depletion allowance could reduce investment in expanding Permian output. Meanwhile, policies like accelerated depreciation schedules for drillers lower costs and spur expansions around Midland.

So Midland’s fate is heavily dependent on external policy factors influencing Permian Basin oil and gas production economics.

Major Ongoing Projects Driving Economic Growth

With the Permian Basin oil boom projected to continue surging over the next decade, Midland has a series of massive oil/gas infrastructure projects underway that will provide ongoing stimulation for the local economy:

New Headquarters Complexes

All the major Permian drillers are building expansive new corporate campus facilities to centrally manage their West Texas operations from Midland including:

  • Occidental’s Midland Headquarters Campus – $60+ million
  • Chevron’s Midland Consolidated Campus- $100+ million
  • ExxonMobil’s New Midland Permian Basin Campus – $200+ million
  • Concho Resources’ Midland Steel Ranch Campus – $450+ million These huge construction projects over the next 3 years will provide an influx of temporary contracting jobs before giving way to thousands of high paid permanent oil jobs when completed.

Permian Highway Pipeline

This new $2 billion, 430-mile natural gas pipeline from the Waha Hub near Midland to the Gulf Coast has employed around 600 construction workers. Now starting operations, Permian Highway provides critical new takeaway capacity to address bottlenecks getting record regional gas production to market – further stoking drilling activity.

Oil Export Terminals

With the ban on crude oil exports lifted in 2015, there has been a flurry of export terminal projects to allow Permian oil access to global markets including:

  • Moda Midstream’s Ingleside terminal construction supporting 300 jobs
  • Buckeye Partners’ South Texas Gateway Terminal conversion generating 500 temporary construction jobs
    The startup of these outlets this year should spur Permian oil producers to turn up volumes – meaning more activity centered around Midland.

I-20 Overpass Upgrade @ Midkiff Road

This $25 million Texas Department of Transportation infrastructure project to ease a major highway bottleneck by raising overpass bridge clearance and widening Midland roadways will support 175 regional construction jobs over its 2 year timeline. Better traffic flow and improved connectivity will help address congestion resulting from breakneck economic and population growth.

With oilfield employment in the Permian Basin projected to nearly double over the next 8 years to over half a million workers, Midland is positioned for continued turbocharged job and economic growth fueled by oil & gas.

These new headquarters complexes, pipeline and transportation infrastructure along with expanding export capacity will provide sustained stimulation – though the pace may fluctuate with the inevitable future oil price volatility.

Opportunities for Economic Diversification

While the oil industry underpins the Midland economy and drives tremendous prosperity currently, the region would benefit from additional diversification into sectors outside oil/gas production for stabilization through price cycles along with added white collar professional roles.

Potential Growth Sectors

  • Renewable Energy Equipment Manufacturing
  • Business Services – Finance/Accounting/Payroll Outsourcing
  • Tech Startup Hub Drawing on Oil/Gas Expertise
  • Aerospace and Defense Manufacturing
  • Logistics/Distribution Center for West Texas

With cheap land, affordable housing, low taxes, and a central location, Midland could leverage its existing strengths to expand into these complementary industries – bringing stability against oil downturns along with additional higher paying services jobs.

Incentives Needed

To draw jobs and employers in new sectors with Midland’s relatively remote location far from major cities, it may require:

  • Tax breaks to lower operating costs
  • Subsidized office space and land
  • Investments in tech incubators
  • Worker training programs tailored to target industries
  • Efforts promoting Midland’s low cost, pro-business advantages to corporate site selectors

While the path forward won’t be easy bidding against larger metro regions, a concerted expansion push could drive meaningful economic diversification – making Midland even more prosperous.

Conclusion: Midland’s Outsized Role Powering US Energy Production

As detailed throughout this deep dive overview, Midland finds itself at the center of the Permian Basin – the most prolific, low cost and strategic oil/gas production region in the United States.

With all signs pointing to surging output over the next decade as new pipeline infrastructure unlocks bottled up production, Midland is poised for tremendous sustained economic expansion fueled by the oil majors and independents rushing to bolster drilling and extraction investments to meet growing global energy demand.

This boom for Midland means prosperity for workers along with strong tax revenue and commercial activity that should overcome the challenges of rapid growth including housing shortages, traffic congestion and strained public services.

The urban center of Midland will continue rapidly expanding to support the anticipated flood of new oilfield service jobs and Permian operations management roles – along with the restaurants, shops, schools, medical clinics and municipal infrastructure to meet soaring population demand.

While the cyclical ups and downs challenging planning long-term remain an unavoidable aspect tied to Midland’s reliance on oil revenue, city leaders have the opportunity during current boom conditions to strategically diversify the economy.

Efforts today launching emerging technology, renewable energy, aerospace or advanced manufacturing hubs could balance Midland’s reliance on fossil fuel extraction – bringing added prosperity and stability for future decades when oil markets invariably seesaw.

For now, Midland finds itself essential to delivering affordable, reliable domestic energy benefiting consumers and businesses across America – fulfilling outsized economic responsibilities relative to its modest population size. This dominant lifeblood industry should allow Midland and the Permian Basin region to continue thriving at the heart of US oil and gas production for years to come.

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Directions

  • Start out going south on N Big Spring St toward W Wadley Ave. Then turn right onto W Wadley Ave. Continue on W Wadley Ave for approximately half a mile then use the left 2 lanes to turn left onto Midkiff Rd. In about a mile, turn right onto Country Club Dr. 2207 Country Club Dr will be on the right in roughly 0.1 miles.
  • Head south on Garfield St toward W Dengar Ave. Turn left onto W Dengar Ave. Then turn right onto Midkiff Rd and continue for approximately 2 miles. Take a slight right onto Country Club Dr. 2207 Country Club Dr is on the right just past Dawn Cir.
  • Begin on Rankin Hwy heading west. In about 2.5 miles, at the roundabout, take the 1st exit onto Midkiff Rd. Drive north on Midkiff Rd for 1.5 miles then turn left onto Country Club Dr. 2207 Country Club Dr is 0.1 miles down on the right, just past the crest of a small hill.