Is Tyler’s economy really tied to oil booms and busts?

A 1933 map of the East Texas Oil Field, by E.D. Ray. Published online by the Texas General Land Office.
A 1933 map of the East Texas Oil Field, by E.D. Ray. Published online by the Texas General Land Office.

“When oil prices go up, Tyler booms.” It’s a sentiment I’ve heard over and over in my years of living here in Tyler. Sure, healthcare and other industries have been growing like crazy in recent decades, but there remains a popular assumption that Tyler is, at its heart, an oil town.

For instance, when sales tax revenues fell last year, city manager Ed Broussard blamed it partly on low oil prices. Tyler Morning Telegraph reporter Roy Maynard hailed 2016 a great year for the economy “despite oil declines.”

But how much does the oil and gas industry really affect Tyler’s economy? Are prices at the pump a local bellwether, or are they, like coal jobs in Appalachia, more relevant to an economy that used to exist, rather than the service-dominated one we have today? Let’s take a closer look.

According to the US Census Bureau, around three percent of Smith County residents who have jobs work in the oil and gas industry, as of 2015. That includes “landmen,” oil industry workers who live here but may travel to other states or countries for work. Those jobs are among the most lucrative in the area; many pay more than $100,000 per year.

As a result, despite the overall small number of employees — probably between 2,000 and 4,000 in any given year — the oil and gas industry pays around four percent of all wages earned in Smith County. That’s a lot, though it was dwarfed by contributions from healthcare (20 percent), manufacturing (14 percent), and retail sales (14 percent).

The oil and gas industry is famously unpredictable. Employment tends to fluctuate more from year to year than in other industries. Even so, incomes from those few jobs are unlikely by themselves to cause big swings in the local economy. However, when it comes to oil and gas, jobs may not be the most important measure.

Tyler was once described to me as a land of retired oil barons. That’s a stretch, but it’s certainly true that many Tylerites bought into oil wells during the the heyday of the East Texas oil boom. It’s hard to know how many families still hold those investments, but it’s likely substantial local wealth remains tied up in oil and gas. When prices go up, those people make money, which could lead them to spend more, or expand other businesses they own. This is the classic “trickle-down” theory of economics famously promoted by Ronald Reagan, and supported to this day by many economists.

It’s unclear if this is actually happening in Tyler, but if it is, it doesn’t appear to be a major economic driver. A Tyler Loop analysis of local sales tax revenues finds no clear correlation with oil prices. More robust statistical tests reveal little more information, because other variables, such as the unemployment rate and the time of year, have a much larger impact.

The best estimate of the importance of oil and gas to Tyler’s economic health comes from Tyler’s chief financial officer Keidric Trimble, who told the Tyler Morning Telegraph last year that two percent of local sales tax revenues were dependent on oil and gas. That fits with the statistical evidence, and suggests that rising oil prices might nudge the economy, but probably can’t change its direction. If anything, falling oil prices could theoretically be a boon to local retail and manufacturing — not to mention cash-strapped consumers — though in recent years such benefits haven’t materialized.

Oil and gas remain an influential part of the local economy, but we shouldn’t necessarily think of Tyler as a community dependent on landmen. While swings in oil and gas prices matter, our long-term trajectory is much more likely to be influenced by shifts in healthcare and retail. There’s a perfect metaphor for this today in Bergfeld Park. Surrounded by mansions built during the 30’s oil boom, the park is now home to Centene Stage — named after the healthcare company that helped pay for its renovation.