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Business

Downturn In Texas Oil Production A Factor In Caterpillar Layoffs

“Every new oil and gas well location site, every drill site, to get that site built and ready, Caterpillar equipment will get used in that,” according to an analyst.

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The low price of oil has been squeezing manufacturers of durable goods in Texas for months. But the latest company to take hit is based deep in the Rust Belt.

Peoria, Illinois-based Caterpillar singled out weakness in the mining and energy sectors as the main reason for its decision to lay off more than ten thousand workers over the next three years. Michelle Foss is chief energy economist at the University of Texas’ Bureau of Economic Geology, based in Houston.

“Every new oil and gas well location site, every drill site, to get that site built and ready, Caterpillar equipment will get used in that,” Foss said. “As well, Caterpillar equipment gets used for site preparation and construction for all of the midstream businesses, meaning pipelines.”

HOME_oil_production_well_in_Brazos_County.jpgAn oil well in Brazos County

The economist notes that oil and natural gas aren’t the only commodities taking a hit. Prices for iron ore and other metals, as well as coal, have fallen sharply over the past year due to weak global growth.

Caterpillar will start by cutting up to five thousand managers and salaried workers, in part by offering early retirement. Most of those cuts will take place by year end. The company will also close or consolidate several factories between now and 2018, eliminating at least another five thousand jobs.

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Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew Schneider is the senior reporter for politics and government at Houston Public Media, NPR's affiliate station in Houston, Texas. In this capacity, he heads the station's coverage of national, state, and local elections. He also reports on major policy issues before the Texas Legislature and county and city governments...

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