Texas Oil and Gas Activity Continues to Grow Despite Rising Costs

The oil and gas industry in Texas is experiencing continued growth despite rising cost pressures and global supply disruptions. According to the Federal Reserve Bank of Dallas, business activity in the sector expanded at a slower pace in the third quarter compared to the previous one. The Dallas Fed's quarterly survey polled 125 firms across Texas, northern Louisiana, and southern New Mexico in mid-September.

The business activity index, which measures conditions facing energy firms, slipped from 46.1 to 38.8. This is still a positive reading but indicates more moderate growth according to analysts. Michael Plante, an assistant vice president at the Dallas Fed, said that while firms produced more oil and natural gas and added to their payrolls, they are also contending with rising costs and longer lead times for getting key inputs from suppliers.

Geopolitical disruptions continue to impact supply and prices, with many executives expecting them to persist for some time. The survey found that most do not expect crude oil exports from the Persian Gulf to return to normal until at least the second quarter of 2027. Cost pressures remain elevated across the board, including input costs for oil field services firms.

When asked about their expectations for WTI crude oil prices by the end of the year, executives averaged $88 per barrel. The most selected response was that it would take 'more than four quarters' for the spread between fuel and crude prices to return to 2025 levels for gasoline and diesel.