Louisiana Pockets Oil Price Windfall From Mideast Row
NEW ORLEANS — ALTHOUGH public demonstrations in Louisiana in recent weeks indicate a growing concern over the buildup of United States troops in Saudi Arabia, the conflict in the Persian Gulf has had one positive effect here: Since August, the spot oil price of Louisiana crude has almost doubled. ``Economically, we've been in a slump since the early 1980s, so any upturn in our fortunes is a welcome development,'' says Timothy Ryan, director of economic research at the University of New Orleans. ``Because the Middle East crisis has driven oil up to new highs, we're suddenly in very good shape.''
Every dollar increase in the price of oil on the international market means up to $30 million in potential revenue for Louisiana, so while state officials here don't necessarily hope for a protracted conflict in the Gulf, they wouldn't mind if it lasts long enough to give the state a budget surplus for 1991.
``There's no doubt, in this case, that what might be bad for the US is actually good for Louisiana,'' says Dan Kyle, director of the Louisiana Legislative Auditor's office. ``It's an inverse relationship - when the rest of the country suffers from high oil prices, we come alive.''
The price of south Louisiana sweet crude per barrel shows the benefit from the conflict. In May, spot oil prices for Louisiana crude stood at $18 a barrel. Last week, the price was up to $28 a barrel, and some experts believe it will go even higher.
The Middle East crisis is just the latest in a string of positive economic developments for Louisiana that many here hope will signal an end to the state's financial doldrums.
Even before the Gulf conflict drove up the price of oil, Louisiana crude was nearing the $20 per barrel mark, a healthy increase over the $14 per barrel price in 1985 and '86.
Louisiana's unemployment rate has also fallen during the past year - down from 1986 when it led the nation at more than 13 percent to last summer's 5 percent, the lowest rate in nearly a decade. Mr. Ryan says the sudden upturn in the state's price for oil means the huge petrochemical industry here is hiring new workers by the thousands, further driving down the state's unemployment rate.
But economists worry that the sudden return of the chemical industry as the major source of jobs and revenue in Louisiana could make the state overly reliant on oil - a reliance that many lawmakers during last summer's legislative session said contributed to Louisiana's economic malaise in the first place.
After the state grappled with a budget deficit of nearly $900 million in the late 1980s, Gov. Buddy Roemer (D) initiated programs to diversify the economy and reduce reliance on taxes levied on the petrochemical industry. But even after Governor Roemer's programs won the lawmakers' approval, petrochemical lobbyists, including the Louisiana Chemical Industry Association, were quick to point out that oil still provides up to 200,000 Louisiana jobs.
``We've made a good effort to build up a different revenue base, and I hope no one changes those plans based on this one experience,'' says Mr. Kyle. ``The Persian Gulf conflict gives us a one-time windfall that we shouldn't look upon as a permanent source of revenue. Hopefully we've learned from our mistakes of the past.''
Ryan says Louisianians should see this ``as a chance to create new opportunities. No one wants to see the Middle East conflict last any longer than it has to. There's one thing we can't forget: This is a very temporary situation.''