Is the Texas Miracle on ice? What low oil prices mean for us

Dale Craymer | Star-Telegram

Over the past eight years alone, Texas’ annual job growth has exceeded the nation’s growth by a factor of four, with Texas adding jobs at a robust 2 percent clip, even in the face of a severe recession.

But much of that growth has been fueled by oil and gas, which is five times more important to our economy than nationally.

The recent price drop has been a body blow to our state — for the first time in 12 years,Texas’ job engine lags the rest of the nation.

Over the past year, oil and gas companies have mothballed more than 600 operating rigs, cut investment by more than $40 billion and slashed payrolls by 65,000, with the further ripple effect of 250,000 jobs lost in other sectors.

Yes, oil and gas still matters in Texas, which produces more than a third of the nation’s oil.

In 2014, the industry accounted for 13.5 percent of Texas’ economic output. Cutting that output by more than half takes a toll on Texas’ overall numbers.

The Texas Miracle appears to be on ice.

That’s not to say the Texas economy is not growing. Some parts of the state are doing quite well.

But hard times in the oil patch mean Houston, the energy capital of the world, and other oil- and gas-producing areas will continue to experience rough waters that will splash onto other parts of the state.

And while Texas will still add another 1 percent to its jobs tally in 2016, that is less than the state is used to and less than the nation overall.

Still, Texas state finances remain sound for several reasons.

First, our revenue structure is more diversified than 30 years ago. While still crucial to the economy, oil and gas is a smaller player.

Second, much of the oil downturn was factored by the Texas comptroller into his official revenue forecast and by legislators into the state’s budget.

Legislators last session left a $4.2 billion cushion in the general revenue fund and roughly $10 billion in the state’s Rainy Day Fund.

This sizable insulation will allow us to weather the downturn without the usual fiscal crisis.

In addition, the state no longer heavily relies on severance taxes to cover basic state needs. Most are dedicated for other purposes.

Third, today’s high production levels lessen the depth of the price crash.

Texas oil production is about 50 percent higher than it was during the 1986 downturn and almost three times higher than it was in 2008. Natural gas production also is substantially higher.

Absent a national recession, Texas state finances are likely to remain in the black for the foreseeable future, even if oil prices continue to be weak.

The price of Texas oil is predicted to fluctuate substantially while averaging under $40 a barrel — about $10 below 2015’s level.

Natural gas prices are expected to hover near 2015 levels.

Producers will continue to cut capital budgets, drill fewer wells, employ fewer people and produce less oil than in years past.

While oil and gas and related industries will continue to suffer, Texas also has a large energy-consuming economy helped by low energy prices.

Other bright spots will be housing construction, service industries and healthcare.

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