‘We don’t know’: Future of Texas’ energy market uncertain after oil prices plummet
Crude oil prices have continued to fall, after plummeting last week to lows not seen since the pandemic.
Crude oil futures fell from roughly $71 per barrel on Wednesday to less than $60 a barrel on Monday, the lowest since April 2021. Prices sat at about $60 per barrel on Tuesday morning.
Though prices are down, experts say Texas’ oil and natural gas industry may manage to weather the storm relatively unscathed — if the entire economy remains strong.
Major stock indexes dropped sharply last week after the Trump administration announced new global tariffs, spurring fears of a recession. As uncertainty pervades Wall Street, some of the country’s largest banks, including J.P. Morgan and Goldman Sachs, have raised their recession risk forecasts.
Experts said the decline in oil prices means consumers will likely see lower gas prices in the short term.
Carl Campbell, former president of the American Association of Professional Landmen and chief operating officer of energy firm Alamo Resources, said the impact of lower oil prices will hinge on how long the decline lasts.
Campbell said the current economic climate has made producers cautious. Too low of prices could halt development; Campbell said oil prices need to hover between $65 to $75 a barrel to encourage new projects.
“We have to find that balance that works best, where it’s a sustainable number at the pump and also a sustainable number for the exploration and production companies that are out trying to make the most of finding additional reserves to serve that need by the public,” he said.
Campbell said the Trump administration may want to lower oil prices to offset cost increases for other goods caused by tariffs — but how long the new duties are in place is anyone’s guess. Markets swung wildly on Monday, after a false report that the administration was considering a 90-day pause on tariffs.
Campbell thinks oil prices will continue to oscillate until the impact of tariffs on the broader economy becomes clearer in a few months.
“There’s always going to be volatility in our industry, and the commodity price moves higher and lower depending on what’s happening with the general market,” Campbell said.
Energy is a cornerstone of the Texas economy.
The state produces about 43% of the United States’ crude oil, and roughly 29% of natural gas. If Texas was its own country, it would produce the fourth most crude of any nation. The state produced a record amount of oil and natural gas in 2024, producing over 2 billion barrels of oil for the first time.
Taxes on oil and natural gas production are expected to generate $17.2 billion in revenue for the state during the 2026-2027 biennium, according to the Texas Comptroller. The state’s oil and gas industry paid $27.3 billion in state and local taxes in 2024 and employed over 492,000 Texans that year, according to the Texas Oil and Gas Association.
But the Texas economy has been crippled by oil busts in the past, most famously that of the 1980s. Experts said the current drop doesn’t come close to recent oil price declines, like during the early days of the pandemic, when oil prices went negative for the first time in history.
A ‘worrisome’ time
Ed Hirs, an energy fellow and economics lecturer at the University of Houston, said tariffs on steel and other materials used for drilling, combined with the dip in oil prices, mean producers are “getting squeezed from both sides.”
To cover operating costs, oil producers need West Texas Intermediate index prices to be about $41 per barrel, according to a survey from the Federal Reserve Bank of Dallas. That price needs to be about $65 a barrel for producers to profitably drill new wells.
Hirs said oil and gas producers won’t drill until prices rise, and he’s surprised layoffs haven’t happened yet. Hirs expects the industry will experience layoffs by June, if prices remain near $60 a barrel.
OPEC+, a coalition of 12 oil-exporting countries, recently announced plans to increase production in May, which has also driven down global oil prices.
“The U.S. oil patch is a high-cost producer in a global commodity market. So, if OPEC wants to chase us off the table, they can do it anytime,” Hirs said. “They can undercut the U.S. cost and U.S. price of oil anytime they want, and so it really becomes an issue of, how long do they want to play this game?”
Hirs said a downturn in the industry would impact Texans in different ways. Communities in energy production-heavy regions, like the Permian Basin, would almost certainly be hit harder than areas with a wider range of industries, like the Metroplex.
“If this persists through the year, we will not have a very good Christmas in the oil patch,” Hirs said.
Karr Ingham, a petroleum economist and president of the Texas Alliance of Energy Producers, said oil and gas producers are “nervous and worried” by the downturn in prices and the uncertainty around tariffs.
Ingham thinks the market will continue to reflect stakeholders’ “valid” fears about the future.
New tariffs are expected to drive up prices for almost all goods, from groceries and clothes to electronics and vehicles. If tariffs cause a national economic decline, demand for energy would likely drop, which could hurt oil and gas producers. Goldman Sachs said Brent crude oil prices could fall under $40 a barrel in an “extreme” situation.
“It’s just worrisome that this set of circumstances has kind of led us to this point where we have a rapid decline and significant decline in crude oil prices,” Ingham said.
Ingham said concerns looming over the entire economy mean the energy market isn’t set up for a quick rebound.
“All of a sudden you have a bit of an unanticipated increase in global crude oil supply. At the same time, there’s concern about recession fears pushing energy demand downward,” Ingham said. “That’s a recipe for prices remaining depressed, not recovering anytime soon. It’ll suit me fine if I’m wrong about this, but that’s kind of how it shapes up right now.”
John Diamond, senior director of the Center for Public Finance at Rice University’s Baker Institute, said some energy producers could slow down their expansion plans, but prices haven’t declined to the point where firms would need to stop production.
“It’s not insignificant, but it’s not a game changer just yet, especially if the economy stays solid,” he said.
Diamond believes the current decline is “more of a short-term dip” and oil prices will recover eventually, but he said they could continue to drop if the economy slows down.
“It is so impossible to wrap your head around what is going to happen, because we don’t know,” Diamond said.
This story was originally published April 8, 2025 at 2:20 PM.
