The Texas Miracle, as the past few boom years have been referred to, was driven largely by the success of energy producers in the state, and the productivity of shale oil and gas wells in the region. Now that global oil prices have fallen nearly 50 percent in the past six months, it is time to measure the potential impact on the state and its economy.
JPMorgan Chief Economist Michael Feroli reviewed the possible impact of lower oil prices on the Texas economy, and warned about the potential for future challenges. "We think Texas will, at the least, have a rough 2015 ahead, and is at risk of slipping into a regional recession," he wrote in a report.
Feroli explains that all oil-producing states will feel a pinch, but no other ones have the infrastructure or production scale of the Lone Star State, and as such will not be as widely affected. In the past years, Texas has grown from providing approximately 25 percent of total domestic oil production to 40 percent.
Fortunately, Feroli also noted some positive aspects for the future that could save the state from a bust similar to the one that took place in the 1980s. The state's share of employment in the oil and gas industry is about 25 percent lower than in the 80s, and technological improvements have lowered production costs, so drilling organizations may not be hit as hard as they were in the past.
Still, it is important that gas drilling companies do not underestimate the economic ripple caused by lowered global prices. Houston oil business consulting can help ensure that current processes are as streamlined and cost-effective as possible, and that your business can successfully weather current market challenges.