Only a "Rip Van Winkle" in this area would not know that Terrebonne, Lafourche and St. Mary are in the midst of a remarkable boom period. With local unemployment at an all-time low, employers cannot find semi-skilled and skilled employees to hire. I have heard of employers who have gone to north Louisiana, Illinois and even Mexico to find employees. Employers are increasingly focusing on training programs. And the cause of this local expansion is a huge upswing in oil and gas exploration in the Gulf. But in Louisiana, we have seen the oil industry boom before, only to find it crashing down around us, leading to the sprouting of "for sale" signs in many of our neighbors' yards. Some believe that we are in for a replay of the 1970's oil boom and are filled with anxiety over an impending 1980's style oil crash. Actually, the current oil boom is not at all like the one we saw about 20 years ago.

In 1973, united in a war with Israel, many Arab countries continued their war with Israel by attacking Israel's backers, Europe and the U.S., by withholding oil, the lifeblood of modern, western economies. Oil prices skyrocketed. Most of the U.S. economy went into a recession, while also experiencing substantial inflation, which was unusual for us. Since this area is a prime supplier to the Gulf's oil fields, we found ourselves at the beginning of an oil boom. This boom began when high oil prices prompted oil producers to seek alternatives to foreign oil. Remember, though, that the upward spiral in oil prices was kicked off by the Arab countries. The OPEC cartel, comprised of these Arab countries along with a few non-Arab oil producing countries, conspired to cut production to raise prices.

There is a fundamental problem with cartels, like OPEC, which have more than three or four members--it is difficult to get all of the members to abide by their agreed-upon production quotas. Once everyone agrees to particular production limits, the smaller members stand to make even larger profits if they increase their production beyond the agreed limit. Not only do the smaller members threaten the stability of the cartel's price, but so does production by non-cartel members, such as the production we saw in the Gulf of Mexico and the North Sea. The high oil prices of the 1970's were doomed to fall because they could not be sustained in the wake of competition from the Gulf and within OPEC itself. OPEC, which raised prices by restraining competition, found that their restraints could not keep competition bound.

The current oil and gas boom has a different cause. As with the 1970's, oil and gas exploration is booming because it is now more profitable than it had been. But now, the root of profitability is due to lower costs of exploration, due to several recent advances in oil and gas exploration and production technology. One example of the new cost-reducing technologies which have cut exploration costs is the 3D seismic technology which increases the accuracy of geologists in predicting where oil is to be found, cutting the rate of dry holes drilled. Horizontal drilling enables one rig to extract oil from a bigger area. There are also many advances in under-water or sub-sea operations which have reduced costs of exploration and production.

The cause of today's boom is technology driven, and so, cost driven. It is not from some fleeting market power of a competing oil producing region. The oil boom of the 1970's was bound to turn into the oil bust of the 1980's because it was brought about by an unsustainable alliance. Today's boom is more sustainable because of its roots in lower costs.

Does this mean that this boom will last forever? Of course not. Since oil exploration is very expensive and it does not generate an immediate cash flow, it requires great sums from investors and is subject to the same factors as other investment activities. Sharp hikes in interest rates or widespread pessimism about the future will lead to a reduction in activity. When will this happen? If I had a crystal ball that could tell me that, I would be sweating in the Gulf of Mexico, with a rod and reel in my hand!