Although oil prices have remained high for several months, Texans waiting for boom times will have to keep waiting, according to a new analysis from the Federal Reserve Bank of Dallas.
Usually, the state sees jobs and GDP grow when oil prices surge, Dallas Fed economists Robert Leigh, Jesse Thompson and Luis Torres noted in a June 5 analysis, but things have been a bit different since the war in Iran began in February.
While Texas is still the nation’s biggest producer of oil and gas, they said, the sector has not seen a surge in activity even as the West Texas Intermediate crude spot price rose from $63 per barrel before the war began in early February to $106 per barrel April 3.
“Uncertainty about how long oil prices will remain elevated is tempering opportunism in an industry that appears far more financially disciplined than in the past,” the Fed economists said.
Further, the state economy has diversified since previous oil booms, meaning that even if oil prices remain elevated, the effects on the state economy overall may be muted.
“The current economic landscape differs significantly from previous oil shocks and may only modestly increase domestic oil production, providing a comparatively mild state economic impact,” they write.
Leigh, Thompson, and Torres also noted that while the Texas economy benefits from high oil prices in certain ways, Texans also face higher costs in the form of high gasoline prices and rising inflation, which cuts into purchasing power.
Nationwide, high oil prices have led to accelerating inflation, according to new federal data released this week. The overall consumer price index rose 0.5% in May, the Labor Department said, bringing year-over-year inflation to 4.2%, up from 3.8% a month ago. The energy index accounted for more than 60% of the monthly increase.
Inflation data for the Houston metro area is reported on a bimonthly basis. The most recent regional report, released last month, found that while overall inflation was a bit lower in Houston than across the nation, the price of gasoline specifically had posted its largest two-month increase in nearly 50 years.
Local consumers may be feeling some relief on that front, at least. Last month, gas prices were hovering over $4 a gallon in Houston. As of June 12, the average price for a gallon of gas stood at $3.66 in Harris County, compared to a national average of $4.11 per gallon, according to data from AAA Texas.