Longanecker: Trump's tariffs threaten the Texas oil boom

The oil and gas industry remains one of the most resilient and impactful sectors in the country, despite efforts by some to derail domestic production based on an ideology, not science, and certain ill-conceived policies carrying unintended consequences.

Though operators have welcomed a reprieve from overly burdensome federal regulations targeting the oil and gas industry under President Donald Trump, newly implemented tariffs on steel and aluminum products by the Trump administration already are having a negative impact on infrastructure development and drilling projects throughout the country.

Not yet feeling the full effect of the tariffs, the Texas oil and natural gas industry has continued to expand in 2018. More than 6,060 net new jobs were added to the state economy in the first half of year compared with 2017, for a total of 331,877 workers directly employed by the industry. (This data is subject to revisions.)


These positions command an average salary of $128,000 per year, 132 percent more than average private-sector wages in Texas, for a total payroll of $42 billion in the state.

Texas continues to lead the nation in oil and natural gas production. Crude oil output in the state equaled an estimated 712 million barrels of production through June 2018, representing an increase of 112 million barrels compared with the first half of 2017. According to the U.S. Energy Information Administration, Texas set a new record for daily oil production this year, officially exceeding 4 million barrels per day.

The agency also forecasts that shale oil from the Permian Basin in Texas alone will account for 50 percent of all new global oil production over the next five years. Natural gas production increased by 16 million cubic feet of gas in the first half of 2018 compared with the same time frame in 2017.


With help from rising oil prices and production, Texas Comptroller Glenn Hegar recently enlarged the state’s revenue estimate by $2.8 billion, projecting a revised budget of $110 billion for lawmakers to spend on the two-year budget. Hegar predicted lawmakers will also have nearly $12 billion at their disposal next year in the state’s Economic Stabilization Fund — better known as the rainy day fund — a pot of money funded almost entirely by oil and gas severance taxes and available for budget emergencies. According the comptroller, this threshold represents the largest “ending balance” in the fund’s history, again thanks to oil and gas.

The economic impact of the steel and aluminum tariffs will be significant for the Texas oil and gas industry and the U.S. economy as a whole if left in place. The positive economic contributions are in jeopardy, hence the recent call for an expedited resolution from Texas Gov. Greg Abbott.

While well-intended, the tariffs ultimately will result in a slowdown in exploration, production activity and infrastructure projects; job loss; and decreased tax revenue. This will reverberate throughout the state and national economy. The Texas oil and gas sector once again joins Abbott in calling for the removal of tariffs on steel and aluminum, for the benefit of our state and industry.


— Ed Longanecker is president of the Texas Independent Producers & Royalty Owners Association, a trade group representing the interests of nearly 3,000 independent oil and natural gas producers and royalty owners throughout the state of Texas.

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