Dallas Fed: Oil and Gas Spending on the Decline

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Written by Daniel Graeber for IIR Energy Intelligence (Sugar Land, Texas)

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Summary

The Dallas Fed said it expects a downturn in spending in the U.S. oil and gas sector. Crude oil prices may be approaching the breaking point for many shale drillers.

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Oil Price Decline Leads to Spending Decline

Capital spending in the U.S. oil and gas sector is expected to decline by as much as 6% annually, the Federal Reserve Bank of Dallas reported Friday.

The Dallas Fed already last week highlighted the economics in the lucrative Permian shale basin. Oil production is holding steady despite a decline in upstream activity because well efficiencies have improved, though the basin is yielding more natural gas as it matures.

On Friday, bank economists said they expected oil and gas capital expenditures in the U.S. energy sector to decline by between 4% and 6%, relative to 2025 levels. While the federal government has put much of its political weight behind fossil fuels, market prices for crude oil in particular may be prohibitive to shale drillers.

"Real WTI prices fell 22.5% year-over-year in fourth quarter 2025, coinciding with an 11.6% drop in real oil and gas private fixed investment growth," the Fed stated. "The two indicators have fallen in nine out of the past 10 quarters relative to prior-year levels."

The U.S. Energy Information Administration, part of the U.S. Department of Energy, said in its monthly market report for February that it expected West Texas Intermediate (WTI) to average $53.42 per barrel this year, about 18% below the 2025 average. That price point still works for offshore barrels, but it could be below the point at which many shale drillers can make a profit.

But it's more than just drilling, the Dallas Fed indicated. A decline in the U.S. energy sector translates to a decline in the U.S. economy as well, albeit minor.

"Looking at U.S. gross domestic product, oil and gas private investment declined 11.8%, yielding a modest drag of 0.06 percentage points on annual GDP growth in 2025," economists said.

Regional basins, meanwhile, are headed for steady oil production levels or declines. In the Eagle Ford basin, federal estimates point to 1.14 million barrels (BBL/d) per day for both this year and 2026. Permian production should average 6.62 million BBL/d and then drop to 6.58 million BBL/d.

Data from Industrial Info Resources show 57 production-related projects in the Permian Basin worth a combined total investment value of $4.38 billion. Divisions of Enterprise Products Partners have the largest footprint in the basin.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project and Plant databases can learn more about Permian projects--including capacities, investment values and necessary equipment--in a detailed list.

Oil Production Slowing Down

Lower 48 oil production of 11.15 million BBL/d for 2026 is a 1.1% decline from last year's average. Levels are expected to fall another 1.7% by next year.

Gains are expected elsewhere in the Americas, however. Several estimates point to production gains from the likes of Brazil, Canada and Guyana. With the United States claiming tacit control over Venezuelan barrels, meanwhile, the South American nation is expected to put more oil on the water over the coming years

That, the Dallas Fed suggested, is leading to a glut. Global inventories are expected to increase by 1.9 million BBL/d for both 2026 and 2027, weighing further on economics.

"Historically, crude oil prices haven't withstood such large surpluses and have ultimately declined sharply," economists wrote.

WTI averaged $76.63 per barrel in 2024.

Lower 48 oil production of 11.15 million BBL/d for 2026 is a 1.1% decline from last year's average. Levels are expected to fall another 1.7% by next year. Gains are expected elsewhere in the Americas, however. Several estimates point to production gains from the likes of Brazil, Canada and Guyana. With the United States claiming tacit control over Venezuelan barrels, meanwhile, the South American nation is expected to put more oil on the water over the coming years. That, the Dallas Fed suggested, is leading to a glut. Global inventories are expected to increase by 1.9 million BBL/d for both 2026 and 2027, weighing further on economics. "Historically, crude oil prices haven't withstood such large surpluses and have ultimately declined sharply," economists wrote. WTI averaged $76.63 per barrel in 2024.

By the Numbers

• 4% decline expected in oil and gas investments
• $53.42 per barrel for WTI this year
• $76.63 per barrel for WTI in 2024

Key Takeaways

• Dallas Fed points to lower capex in U.S. oil and gas.
• A glut may be coming.
• But U.S. oil production could be on the decline.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).