From boom to bust: Louisiana oil industry feels pinch in 1980s
Basing an entire regional economy on a single commodity has always been a risky endeavor, with dizzying booms often followed by calamitous crashes. New Orleans and all of Louisiana discovered that volatility first-hand in the mid-1980s. For decades, the Pelican State had taken advantage of bountiful reserves and record-high crude-oil prices to create a thriving local economy, but when a major oil supply glut in the early 1980s spread across the globe, combined with political unrest and economic jockeying in the Middle East, the price of petroleum plummeted, throwing thousands of New Orleanians out of work and casting a gloomy economic pall for years to come. By March 1986, the oil bust had caused Louisiana’s unemployment rate to hit 13.2 percent, the highest in the country and nearly 6 percentage points above the national average.
It would take two decades for the regional petroleum industry to regain firm footing, a process helped along by a spike in deepwater drilling activity in the Gulf of Mexico in the 1990s and then in natural gas production about 10 years after that. But economic and industry analysts stress that the New Orleans area can avoid future roller-coaster rides by diversifying its financial lifeblood.
- The state’s gross petroleum output didn’t exactly grind to a halt in the 1980s. The industry siphoned black gold at mega-rates, adding to the global glut. In 1985, Louisiana produced more than 5 trillion cubic feet of gas and more than 500 million barrels of oil. The problem was that doing so was much more costly for domestic businesses, making it tough to sell petroleum on the global market, at least at prices competitive to those of OPEC nations.
- According to contemporary numbers from the Louisiana Department of Labor, by 1986 the petroleum industry provided jobs to 5 percent of the state’s population and paid 8.5 percent of its wages. Other research found that employment in the petroleum production industry topped out in 1982 at 94,700 jobs but had dropped by about 15 percent three years later.
- The petroleum crash in the state mirrored the drop in crude oil revenue across the globe and gained the attention of national media, including the American Bar Association Journal, which, in April 1987, began an article on the glut by citing one particular billboard advertisement from Louisiana: “Dear Lord, please send us another oil boom. We promise not to mess this one up.”
- With unemployment racking the region, southeastern Louisiana witnessed major population movement during the boom-and-bust cycle of the 1960s, ’70s and ’80s. In the’80s, Louisiana saw an outmigration of about 411,000 people. Between 1980 and 1990, only four parishes — St. Tammany, Livingston, St. John the Baptist and Ascension — showed net population increases. New Orleans, though, was hit hardest, with a net outmigration of more than 100,000, the type of exodus not seen again until Hurricane Katrina.
- The number of bankruptcy cases being processed through the courts in Louisiana doubled between 1981 and 1986, with an estimated 11,000 of them eventually clogging the courts.
- The bottoming-out of the oil industry triggered major budget problems in local and state governments, with a decline in tax revenue forcing the state to operate on yearly deficits well into nine figures.
- The petroleum calamity might have happened when a former movie actor was in the White House and the Gloved One was first doing the moonwalk, but the roots of the plummet stretched back to at least the Truman administration and Huey P. Long’s reign in Louisiana, Tulane professor Chris Smith says. For decades, domestic politicians often had to twiddle their thumbs waiting to see what OPEC and its member nations — many of whom could, and still can, produce oil much more cheaply that U.S. businesses — were going to do with their outputs and quotas. Tariffs on imported foreign oil, designed to help domestic producers be more competitive on the global market, backfired and only served to tick off OPEC. When the United States supported Israel in the 1973 Yom Kippur War, OPEC nations “punished” the States by manipulating production and prices.
The tumultuous boom-and-bust cycle of the petroleum industry didn’t just put a crippling dent in the city and state’s economic and financial picture, but it also served as a source of inspiration for Louisiana’s creative and artistic minds, who produced works that reflected the ways the bust impacted the social and cultural fabric of the region. One such artist was celebrated Hammond author Tim Gautreaux, whose 1999 novel “The Next Step in the Dance” centered around the romance between two residents of the fictional town of Tiger Island and was against the backdrop of economic instability. “A lot of marriages broke up during the oil bust,” Gautreaux told Times-Picayune writer Susan Larson at the time. “It put tremendous stresses on the population of Louisiana. I just felt it had all sorts of things going for it — a sense of culture, a sense of place, and not a place in stasis, but a place in turbulent movement. It’s nice to have reality on your side.”