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Oil Boom Fuels Economic Resurgence in Farm Country

The U.S. economy has been hurt by soaring energy costs, a sharp decline in housing values, and turmoil in the credit markets. And there was more bad news this week, as the housing market reported a continued decline in sales and companies cut back on hours for their employees.

But there's a place where most of the bad economic trends sweeping the United States are turned upside down. Home values are up, foreclosures and unemployment are down, and gas-guzzlers are flying off the lot. We're talking about Kansas, which has 23 times more oil wells than Saudi Arabia … on a piece of land that's 26 times smaller. As Frank Morris explains, record oil prices, coupled with soaring prices for grain, have sparked a dramatic economic reversal there.

Until recently, times were tough on the High Plains. Thousands of farms went bust, whole communities withered. But Jerry Marmie, whose car and truck dealerships flank both sides of the highway running through Great Bend, Kansas, says sales are way up… especially for big, fully-loaded trucks. He proudly shows off one of his best-sellers. "This is the Dodge half-ton quad cab with the Hemi, in a four-wheel drive."

Quite a few of these trucks are being purchased by small businessmen, like the ones who converged on Hays, Kansas, recently, for a meeting of the Kansas Independent Oil and Gas Association.

Most of the men here look more like farmers or factory workers than oil company executives. There actually aren't any big oil companies in Kansas, just a bunch of guys like Dick Schremmer who have clung to the business. He's glad he did. "If it was any better I'd have to be twins!" he says with a laugh.

Some 44,000 oil wells dot the Kansas landscape, with bobbing pumps that look a little like rusty pterodactyls dipping over for a drink. A typical well here slurps up just a little over two barrels a day… compared to nearly 5,000 barrels a day for an average well in Saudi Arabia. And a decade ago, when oil was $9 a barrel, Schremmer says it cost a lot more to wring it out of the prairie than it was worth on the open market. "There was no light at the end of the tunnel, so you just hung on and hoped something would happen."

And something did.

As oil prices climbed, they pushed up the price of corn, which can be distilled into ethanol. Naturally, farmers planted more corn, driving up the price of other crops. Meanwhile, the falling dollar boosted U.S. farm exports. All this has led to unprecedented good fortune for guys like Leo Dorzweiler, a third generation Kansas farmer, with oil on his land. "It is unbelievable yes, but y'know, the average working man, their wages have increased tremendously, and they need to, but our wages never kept up with that, but now it is just the other way."

Back in Great Bend, mechanics are working in a big, bright, new tractor repair shop. You'd never know by looking, but Wally Straub, who owns this dealership, almost went broke back in the '80s. "Agriculture right now is very good," he says happily. "The winds are blowing from a different direction… finally." He says his biggest problems these days are finding enough people to hire, and keeping up with demand for all the huge, expensive tractors, combines and farm implements he sells.

"You know, we've got little farmers that never used to be able to dream of buying a new piece of equipment," he points out. "Everything they bought was old and used. And some of these guys today are buying a new piece of equipment again. You know, with the price of grain they can afford to do it."

Little towns like Great Bend rise and fall with the fortunes of farmers and oilmen. A couple of decades ago, about quarter of the houses for sale here were in foreclosure… some had lost half their value. Now, foreclosures are almost nonexistent and home prices are up, while unemployment has sunk to about 3 percent.

Still, many here with no connection to oil or farming continue to toil in low-wage jobs. Turning her weathered face into the hard, cold north wind, Rickie Weighous stops for gas near the big truck dealership in Great Bend. "Well, I cut back a lot on groceries, I just buy just what I can afford," sge says. "Far as gas, I come in here once every two weeks and fill up and that's it."

Weighous works in a grocery store. She says she once owned land, with crops and oil, but had to sell it when times were tough. "You see why I drive an old truck? I can't afford a new one." But she adds that her 1981 Chevy still runs pretty well.

Although not everyone is sharing in the new prosperity from oil and agriculture here in western Kansas, it's hard to find anybody who's complaining about the disparity. Most are just thankful that things produced in this patch of prairie are, at least for now, in such high demand.