Oil and gas activity in the region dipped slightly in the third quarter with rising uncertainty over upcoming elections and the economy, according to the latest quarterly energy survey released Wednesday by The Federal Reserve Bank of Dallas.
The survey includes select comments from energy executives who raised the upcoming election and wider economic concerns producing uncertainty in the energy sector.
“We are hearing and seeing a continued reining in of activity from our customers due to the uncertainty regarding the November elections. There is work out there, but it is just being held until there is some certainty regarding energy policy,” an executive from an oil and gas support firm said in the survey.
The region includes all of Texas, southern New Mexico and northern Louisiana.
Texas leads the country in the oil and natural gas sector, accounting for 43% of crude oil and 25% natural gas production nationally, according to a 2022 report from the Office of Gov. Greg Abbott. The sector directly employs more than 400,000 Texans and indirectly supports over a million jobs in the state.
With control of the White House and Congress up for grabs in November, polls show former President Donald Trump and Vice President Kamala Harris are locked in a close race, while forecasters also predict a tight contest for control of both the U.S. House and Senate. The outcomes of those races will determine key policy decisions in the energy sector, ranging from pipelines and fracking to automotive and energy standards.
Another executive pointed to Federal Reserve rate cuts and the fear of a recession as a greater factor impacting their business.
“The recession scare is front and center. The presidential election is a sideshow in terms of actual effects for most energy firms,” the exploration and production firm executive said.
A slight decrease in crude oil prices is another factor causing uncertainty and clouding the outlook for energy firms, said Kunal Patel, a senior business economist at the Dallas Fed. The average price per barrel during the second quarter survey was $80 and it decreased to $71 in the third quarter survey.
Despite the pessimism and slight decrease in activity, absolute activity in the oil and gas sector remains “at a very high level” following lows in 2020 and 2021, Patel said.
The survey collected data from 136 energy firms in the 11th District covering Texas, northern Louisiana and southern New Mexico. Responses were used to calculate an index for different indicators covering activity, employment, costs and other factors.
