Visualizing oil's economic footprint in Texas
- Ben Geman, author of Axios Generate
Oil and gas production is a key part of the Texas economy. But the state is poised to perform well even if tackling global warming sends the sector into decline, a Dallas Fed analysis argues.
The big picture: Energy price swings have long affected Texas' financial fortunes, with sharp declines "depressing broader activity."
- But the relationship has its limits. From the early 1980s until the early 2000s, production declined yet Texas' economy kept outperforming the nation, the analysis notes.
Why it matters: "This experience suggests that the relative strength of the Texas economy could persist in coming decades even if the upstream oil and gas sector experiences a long-term decline due to the energy transition," write economists Christopher Slijk and Keith R. Phillips.
How it works: The state's economy has been diversifying for decades. Oil and gas production's share of the economy remained below its early 1980s peak even after the fracking boom began in the 2000s.
- Some diversification has been into oil and gas linked sectors, like petrochemicals.
- But there's also the expanded tech sector, renewable power, computer IT services and more.
The bottom line: "Over the next several decades, the enduring factors that have drawn people and businesses to Texas are likely to continue to play an outsized role in determining the state’s growth premium relative to the U.S."