Travel south and southeast of the Texas Hill Country and you find yourself in the boom town speckled geographical area that sits atop the Eagle Ford oil shale play. Over the past few years, the economic growth from this and other shale plays in Texas and from around the U.S. have contributed to an increase in land and property values here in Texas in general and the hill country in particular.
But with the price of oil hovering around the $50.00 per barrel level, what does the future hold for property valuation and the Texas real estate industry? That was the question of the day at the SABOR annual market forecast breakfast yesterday. Only time will reveal the ultimate answer to that question.
Theories abound as to why oil prices are falling, but the bigger question has to do with the "if" and "when" of whether or not prices will rise again. If extracting oil from shale indeed requires a $50.00-60.00 per barrell floor and prices keep falling, Texas property values may stand to suffer.
Forbes points out that the estimated break even price per barrel for Saudis is in the $99.00 range. If that's the case, then are the Saudis betting that they can break the production backbone of Russia, Iran, and maybe even the U.S. shale producers before their $900 billion in reserves runs out? Maybe so, but how long does it take at today's prices to strain the cash reserves of the Saudi's? That may well depend upon how far the prices fall and for how long they stay low.
Meanwhile, we'll make the most of it here and enjoy our sub $2.00 per gallon gasoline prices.
Comments(3)