Welcome to hard times
by Ed Quillen
First, there's the dark cloud: The economy of the Mountain West is going into the tank for a few years, and there's not much that anybody -- including the Democratic Congress and President Barack Obama -- can do about it. But then there's the silver lining: As our regional economy tanks, the West will become a better place to live.
Consider what has been driving the economy of the rural West in recent years. Start with the "energy boom," with its oil- and gas-drilling rigs sprouting across once-remote areas. Add increasing demands to develop oil shale and a lot of prospecting for uranium.
Now look at the price of crude oil, which serves as an indicator for energy prices in general. Crude peaked last summer at $140 per barrel, and now it's below $60, with no immediate prospects for substantial increase. Americans are consuming less, and the global economic decline means less demand from emerging markets like China and India. Hoping to halt the price plummet, OPEC is considering production cutbacks.
A lot of projects that make economic sense when oil is $140 a barrel and climbing make no sense when it's $60 and dropping. Energy companies will have to cut back on exploration and drilling, meaning fewer man camps in our back country, less social disruption in many rural towns, and reduced demands on school districts and sheriffs' departments -- not to mention easier times for our now-stressed wildlife.
Oil, natural gas, uranium -- they all follow what economists call the "commodity price cycle." As demand rises, so does price, until it reaches the point where it's profitable to invest in new production. The new production comes on line. Supplies rise, and prices drop. Companies worry about being able to sell what they're already producing; they don't go out prospecting for new sources.
So the current boom will fade, although its collapse might not be as dramatic as that of May 2, 1982, when Exxon, after spending more than $1 billion in western Colorado, pulled the plug on its proposed $5 billion Colony oil-shale project.
As for mining in general, note that gold, silver, molybdenum and just about every other thing we dig up also follow the commodity price curve. Their prices soared, production went up -- and now the prices are sliding as inventories grow. Don't look for new mineral booms.
The other major economic driver, the one that preceded the most recent energy boom, is "second-home construction." In fact, many of these new houses on Western acreages are the full-time homes of retirees rather than vacation retreats, but their construction has the same effect on local economies.
And that's a bigger one than we often realize. A couple of years ago, I heard Jim Westkott, Colorado's senior state demographer, explain that we should regard residential construction as a major industry, something like a huge mine. The work sites may be scattered across the countryside rather than concentrated at a portal, but the effect is the same, since this industry employs an army of carpenters, masons, glaziers, electricians, plumbers, architects, landscapers -- everything from heavy-equipment operators to interior designers.
How's the "mortgage meltdown" affecting this industry? My contractor friend Kirby, who specializes in upscale rural residences, had four houses under construction a year ago. Today he has only one, with nothing new on the immediate horizon, and he's had to lay off most of his employees.
I asked a local realty agent. She said the financial collapse hasn't visibly affected those very rich people who want to build mansions hereabouts. But once you move down the financial food chain, you start to see problems.
"I've talked to a lot of people who had been planning to retire to the mountains," she said, "and now they're telling me that their 401(k)s have tanked and they're going to have to keep working, so they won't be moving here anytime soon."
There's a domino effect on real estate, she said. "A California couple might want to sell their home for, say, $2.5 million, and move to the Rockies where they'll build their dream home. But they're depending on somebody else selling his home for $1.6 million to be able to buy their house, and so on down the line. If values are collapsing there, if people can't get those mortgage loans, then we don't have those buyers here."
So even if there aren't many foreclosures here, she said, "we're already feeling the pinch." And where there are a lot of foreclosures, she said, "then there might be a solution to the affordable-housing problem."
Thus there aren't nearly as many construction jobs as there were a year ago. But though I don't like seeing anybody lose honest work, there's some sunshine in this gloom.
Illegal immigration will fade as an issue. The Mexican consulate in Dallas says unprecedented numbers of Mexican citizens are seeking the paperwork to return home because they can no longer find work in America.
Life will get a little easier for those of us who stay. When I called Gary the Plumber last year, he said it would be a while before he could get to me, and observed that he much prefers new construction to contorting himself in my cramped cellar. When I called last month, he was here in a few minutes.
Meanwhile, as our economy recedes, the greedheads who were just here to make a quick buck will quickly migrate to greener pastures. The people who stay -- the folks that Wallace Stegner called "stickers" -- will be those who really want to live in the West, and they will find a way to make it work.
So there's a dark cloud over the West right now as the boom turns to bust. Hard times loom. But we'll be better for it, if we stick it out.© High Country News