With a national recession under way, Lafayette will once again live or die by oil. The estimated $9 trillion in wealth that has disappeared in the country with the recent stock market collapse is certainly being felt across households in Acadiana, especially among retirees living on fixed incomes and those hoping to retire soon. So while immediate impacts may not be noticeable just yet, Acadiana will feel the pinch. “That will have some impact on sales in your area, especially sales of durable goods like cars, appliances, electronics, houses,” says Dr. Loren Scott, one of the state’s foremost economists.
But we shouldn’t get bitten like much of the rest of the country — and possibly some other parts of the state (see story above).
High energy prices have historically kept Lafayette from participating in the country’s recessions, and Scott expects the same scenario to play out this time around. Though Lafayette’s economy is certainly increasingly more diverse, our region still lives and dies by swings in energy prices that can often be quite dramatic. Scott notes that this also means downturns take place in our local economy when the U.S. economy is doing just fine — all of which has area residents a bit on edge about fluctuating oil prices of late.
Declining global demand resulting from the economic downturn sent oil prices sliding below $80 last week, down 45 percent from the record $147.27 in July. On Monday, however, a pledge by European countries to keep the banking sector afloat renewed optimism into oil markets and prices rebounded from their 12-month low to well above $80 a barrel. OPEC’s decision to call a special meeting next month over the price decline was also a factor in the rebound.
This roller coaster ride is very likely to continue — but it will take a major, prolonged dip for Lafayette to participate in the rest of the nation’s economic woes. Scott predicts that for the next two years oil prices will range from a high of $100 to a low of $80 on an annual average basis. “For your region to suffer, I think oil prices would have to fall below $30,” Scott says. “[But] you will see some slowdown from the present run if it falls below $50.” The economist stipulates that such a decline would require “a really deep and prolonged global recession” that could dramatically reduce the demand for oil, cautioning that there is strong disagreement over the length and depth of this national economic downturn.
On Thursday, Oct. 23, from 11:30 a.m. to 2 p.m. at the Lafayette Hilton & Towers, Scott will bring a local perspective to the economic crisis, including his thoughts on how long the downturn will last. The release of the 27th edition of his and his colleagues’ Louisiana Economic Outlook could not come at a better time for our community, which like the rest of the country is growing more anxious by the day. The forecast went to press in late August and was updated to reflect the unprecedented events at the national level, including Congress’ $700 billion rescue plan. As the featured speaker at The Independent Weekly’s Entrée to Business luncheon, sponsored by Dwight Andrus Insurance and MidSouth Bank, Scott will also comment on how the economy of each of Louisiana’s MSAs has reacted to national recessions in the past. Louisiana Secretary of Economic Development Stephen Moret will follow Scott’s presentation.
Theirs is a critical analysis you won’t want to miss.