Dallas Fed Sees Job Woes in the Oil & Gas Sector

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

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Summary

The Federal Reserve Bank of Dallas reported in its energy survey for the first quarter that oil and gas sector representatives were highly pessimistic about their future. Another report finds job prospects dwindling.

Low Levels of Jobs

Following reports of a dismal mood in the energy sector, the Federal Reserve Bank of Dallas said job prospects were at "very low levels." According to Industrial Info Resources data, there are some 466 active oil- and gas-related upstream and midstream projects in Texas in various stages of development with a total investment value of $187.7 billion.

Industrial Info has followed the knock-on effects of war in the Middle East since the conflict began in late February. A report Monday found that crude oil prices continued to rise amid dimming prospects of a lasting cease-fire, and it was reported last week that the mood in the room was darkening, even with higher crude oil prices.

"The unpredictable nature of the current administration makes business modeling near impossible" one respondent told the Federal Reserve Bank of Dallas for its quarterly survey.

That could be spilling over to the sector as a whole. Earnings season has already revealed some angst, with upstream services firm Baker Hughes saying the war impact was causing some inflationary pressures.

"Disruptions across critical energy corridors, including the Strait of Hormuz, have tightened global oil and LNG balances, leading to sharp price increases," Lorenzo Simonelli, the company's top executive, said in the earnings call. "These developments have heightened inflationary pressures, which would present downside risk to global economic growth should the conflict persist over an extended period."

On Monday, the Dallas Fed said job losses in the oil and gas sector declined substantially year-on-year, contracting 6.7% on an annual basis to February.

"Houston's labor market from February 2025 to February 2026 reflects trends at the national and state levels," Fed economists wrote. "A nationwide reduction in both labor supply and demand has slowed job growth to very low levels."

Before the start of the conflict in February, anxiety was high given signs of an affordability crisis stemming from U.S. President Donald Trump's protectionist trade policies. Last week, the Bureau of Labor Statistics reported that 5.7% of families counted one unemployed person in 2025, up from 5.3% the previous year. To February, only one state, Florida, saw a meaningful uptick in employment.

Will It Get Better with Higher Prices?

West Texas Intermediate, the U.S. benchmark for the price of crude oil, was trading at around $100 per barrel on Tuesday, well above the break-even point for many shale drillers. The lower-for-longer outlook for crude oil prices that preceded the war saw Texas oil production decline by 3.4% during the fourth quarter to average 5.6 million barrels per day (bpd).

It will take time, the Dallas Fed said, for higher prices to translate to an increase in production.

"It takes about 6 to 8 months for production to show material growth in response to higher prices," economists wrote. "The recent surge in oil prices will likely contribute to modest gains in oil production by the end of the year."

By the Numbers

• $100 crude not helping much
• 1 state, Florida, notched employment gains

Key Takeaways

• Energy sector optimism fading quickly
• Production should eventually respond to higher market prices

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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, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).