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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: John Vosilla who wrote (28262)3/17/2005 5:33:16 PM
From: Elroy JetsonRead Replies (1) of 306849
 
I worked for Chevron from 1978 until oil prices collapsed in 1983. I can tell you that the primary difference, between the run-up in oil prices now and the run-up in oil prices during that period, boils down to "belief".

In real terms oil prices were higher in 1982 than they are today but oil company executives believed they would double and triple from there over by the year 2000. Today, in spite of theories of peak oil, oil company executives generally believe this run-up in oil prices will be cut short by the next recession. Once burned twice shy.

The boom in Texas during the early 1980s was driven primarily by jobs created by vast sums spent on oil exploration and new production and more significantly non-oil projects undertaken in expectation of future expansion of the oil industry. Very little of the boom was driven by oil royalties, especially realizing that a large portion of the profits from actual well production in Texas is paid out to the well owners who are just as likely to live in New York or London.

Today we have the modest increment from higher oil prices but very little expansion in the oil company budgets for exploration and production. There is certainly no one building a new $65 million Tanglewood apartment complex in Houston in expectation of a huge expansion in oil industry employment. Those who recall those times may be inhibited by the memory of the Tanglewood apartment complex being sold for $16 million one year after completion.
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