Texas’ energy-fueled economy has just seen a contraction, but a Texas Oil & Gas Association economist says it was to be expected after the growth it had been showing.
Dr. Dean Foreman made his analysis after the Dallas Federal Reserve Bank reported that the state’s economic expansion had slowed and its business outlook had weakened.
“While an accurate reading of economic statistics, a broader context offers reasons for optimism,” Foreman said from Austin.
“Texas’ economy led the nation’s growth for the two most recent quarters, growing at an average annual pace of 7.6 percent or more than 2.5 times the U.S. average over the latter half of 2022,” the economist said, citing the U.S. Bureau of Economic Analysis.
“What goes up must generally come down. A slowing expansion is both typical and healthy following periods of rapid expansion.”
Excluding the post-pandemic rebound, Foreman said, Texas’ past two quarters are the state’s best performance since late 2014 and early 2015.
“A detailed look into energy industry drivers shows that the sources of the state’s strength are even clearer with Texas’ real Gross Domestic Product achieving a record high of $1.92 trillion in the fourth quarter of 2022, making it the fastest growing state over the second half of 2022,” he said.
“Over 70 percent of real growth in the second half of 2022 was driven by oil and natural gas-related industry segments while the industry’s direct employment rose by 8.3 percent year-over-year to 477,327, generating $13.8 billion in wages according to Texas Workforce Commission.”
Similar to 2014-2015, Foreman said, the oil and gas sectors of Texas’ economy contributed strongly and drove over 70 percent of real growth over the latter half of 2022.
“The recent oil and gas expansion has also brought significant gains in employment and wages to the tune of 8.3 percent year over year in job growth and 11 percent in wage growth,” he said. “This occurred despite oil prices that were on par with their median since 2006, adjusted for price inflation, which is an indication that Texas has become a relatively more important energy source.”
Foreman said Texas’ shares of American oil and gas production rose to over 43 percent of U.S. crude oil production and 26.5 percent of natural gas production.
“A potential sign of slowing, however, stems from recent reports that drilling rig counts decreased by 7.7 percent year-to-date in Texas to 347 active rigs as of June 9 from 376 rigs as of December 30, 2022, according to the Baker Hughes Corp,” Foreman said.
“By comparison rig counts fell by 23.8 percent in Colorado, 36.2 percent in Oklahoma and 15 percent in Wyoming over the same period, he said. “Consequently, Texas oil and natural gas have fared relatively well at the same time as the state’s production levels have achieved new record highs so far in 2023 according to the U.S. Energy Information Administration.
“These signs of both absolute and relative strength amid broader economic uncertainties are encouraging indicators that Texas oil and gas will drive growth going forward.”
TXOGA President Todd Staples said Texas “continues to set new records and the oil and natural gas industry is the pacesetter for more employment, better wages and increased revenues to fund our universities, roads and first responders.
“When oil and natural gas do well, all Texans benefit,” Staples said. “However, growth is not guaranteed and some signs of slowing are occurring.
“Continued thoughtful discussions with state leaders about sound policy are needed to encourage more investment and growth and to pave the way for future opportunities.”
