Friday, December 05, 2008

Panic like it's 1986. . . .

I remember what 1986 and 1987 were like in Louisiana, when oil prices collapsed and the bottom fell out of the petroleum bidness.

Unemployment surpassed 13 percent, businesses failed left and right, tax revenues fell through the floor, more than 100,000 Louisianians said goodbye to all that . . . and we had a saying. Perhaps you remember it:

"Will the last person leaving Louisiana please turn out the lights?"

RECALL THIS ALL took place in the Gret Stet when the rest of America was enjoying the Reagan economic boom. But now, says Bloomberg, commodities analysts predict we're on the way to a $25 barrel of oil, thanks to global recession and the resulting collapse in demand for black gold:

U.S. stocks fell for the first time in three days, pushed down by concern General Motors Corp. may file for bankruptcy and a plunge in energy shares following Merrill Lynch & Co.’s prediction that oil will hit $25 a barrel.

GM lost 16 percent after a person familiar with the matter said the largest U.S. automaker is exploring a reorganization with workers, creditors and lenders. Southwestern Energy Co., EOG Resources Inc. and Exxon Mobil Corp. slumped, sending the Standard & Poor’s 500 Energy Index to a 6.2 percent decline. Apple Inc. slipped 4.7 percent as Nokia Oyj said the global mobile-phone market will shrink 5 percent or more next year.

The S&P 500 lost 2.9 percent to 845.22. The Dow Jones Industrial Average fell 215.45 points, or 2.5 percent, to 8,376.24. Indexes also dropped after the Labor Department said more Americans are collecting jobless benefits than at any time since 1982. Economists estimate a report tomorrow will show the unemployment rate increased to 6.8 percent, a 15-year high.

“As bad as you think it is, it’s worse,” said Diane Garnick, who helps oversee about $500 billion as an investment strategist at Invesco Ltd. in New York. “The chances of the economy turning around in the first half of 2009 are declining rapidly because unemployed people can’t spur economic growth.”


Southwestern Energy, an oil and natural gas producer, fell 15 percent to $26.34 as all 40 energy companies in the S&P 500 retreated. EOG Resources, the former oil and gas unit of Enron Corp., slid 14 percent to $68.79. Exxon, the world’s largest oil company, lost 3.4 percent to $76.27.

Crude oil tumbled 6.8 percent to $43.59 a barrel in New York, the lowest price since January 2005. It has plunged 70 percent since the closing record of $145.29 set in July and may fall below $25 next year if the recession that’s slashing fuel demand around the world spreads to China, Francisco Blanch, commodity strategist at Merrill Lynch, wrote in a report today.
YES, EXPERTS say Louisiana's budget is less dependent on oil now. Then again, the 2009 state budget is predicated on tax revenues from oil at $84.23 a barrel.

That's a lot higher than $25. What do you figure is going to happen in that case?

And what do you figure is going to happen to that woebegone state when, constitutionally, leaders -- more or less -- can't cut any big-ticket items other than health care and education? It's not like Louisiana can afford to get dumber and sicker.

The '80s almost killed off the Gret Stet during an time of plenty elsewhere in the United States. Amid the nation's worst economic climate in 70 years, the '00s (read as "Uh-Ohs") could finish the job.

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