In Harrison County, Ohio, drilling company worker Rick Lucente sums up all that is wrong with the mainstream media's narrative (puppeting even The Fed's great thinkers) about what great news low oil prices are... while his monthly gas bill for his Chevy pickup truck has dropped, he admonishes, "That’s not going to replace a paycheck... and I don’t know why this is happening."
The collapse of oil prices in the past six months is threatening to end a recent industrial revival in manufacturing centers like this town of 64,000 people on the banks of Lake Erie.
The U.S. shale-drilling boom lifted Midwest manufacturing economies, enriched property owners with mineral rights and even brought back the fat blue-collar paychecks that once were harder to find.
But as drilling and exploration for new oil and gas slow with the drop in energy prices, cutbacks at heavy-industry companies are cropping up.
As the town's mayor explains...
The impact of the energy industry here is so widespread that for some workers in Lorain, oil prices affect almost every facet of their lives, from home values to roads to jobs.
“We thought this time the going was going to be good for a while,” said Chase Ritenauer, the town’s 30-year-old mayor. “But now Lorain is going to feel the impact of the global economy.”
As we reported yesterday, workers are being laid off and plants shut down...
“Yeah, I’m worried. You’d have to drive 50 miles to find another job like this one,” said Dana Smith, a 43-year-old father of four and technician at the U.S. Steel plant. “I’ll survive. I always do, but this will be hard.”
Mr. Smith, who said he makes $20 an hour, joined the mill 18 months ago, which could make him “probably be one of the first ones to go.”
And the pain will spread...
U.S. Steel’s pain will be shared. The plant gets its raw steel from another plant in Lorain, once owned by U.S. Steel and now controlled by Canton-based Republic Steel. If U.S. Steel shuts down here, business at Republic will dry up, too. Other suppliers and contractors who work with the plant also will suffer. Republic was unavailable for immediate comment.
In addition, a half-dozen new plants providing steel for the oil and gas industry have been built in the past five years from Ohio to Texas. Boosted by the energy industry, Ohio’s unemployment rate has fallen to 5%, the lowest in 13 years.
In nearby Youngstown, Ohio, Vallourec SA of France recently opened a $650 million plant able to produce 500,000 tons of steel a year. “We are looking at oil price trends very cautiously and closely monitoring our customer’s activity,” said Héloïse Rothenbühler, a spokeswoman for Vallourec. “The oil and gas sector is, by nature, cyclical, and we’ve adapted to similar cycles in the past,” she said.
In addition to new capacity, imports to the U.S. have surged, fueling a steel glut. Prices in the U.S. for benchmark hot-rolled coil have dropped 10% in the past four months, to $600 a ton. “It’s two steps forward, one step back,” said Lisa Goldenberg, president of Delaware Steel Co., a steel trading company. “Right now, it’s one step back.”
Simply put, the job loss mulitpliers are massively outweighing the gas (tax cut) gains... as Lorain's mayor sums up so well...
a U.S. Steel shutdown would hurt city finances. The company paid $1.8 million in taxes last year out of a total city budget of $30 million. A shutdown for even a quarter could cost the city $400,000, Mr. Ritenauer said. “That might not sound like a lot, but our city budgets are usually pretty tight.”
The lower oil prices will offer some modest savings. Lorain has around 100 police officers. “And it’s snowplowing season,” said Mr. Ritenauer. But the fuel bill for its snowplows is in the mere tens of thousands of dollars. Savings might be 30%. “We’d rather the plant stay open,” he said.
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