ODESSA — After COVID-19 tanked oil prices, Texas’ oil and gas industry rebounded.
By 2024, operators were drilling record amounts of oil. Each barrel sold for at least $70, bringing profits and momentum that enriched the state’s coffers, school districts and local government budgets with billions in tax revenue.
Now, President Donald Trump’s pledge to bring oil prices down to $50 a barrel could decimate that momentum, making trouble — even if temporarily — for the Lone Star State.
Trump, who suggested the U.S. should take control of Venezuela’s oil after the country arrested President Nicolás Maduro, could certainly deliver on his promise to lower fuel costs for consumers by flooding the market with the South American country’s oil.
The result would be damaging for Texas oil and gas production, the backbone of the state’s economy, some experts argued. Operators will find it harder to break even on costs — much less profit — resulting in dwindling production for the industry’s estimated 495,000 Texas employees. And parts of Texas, such as the Permian Basin, where city and county governments rely on oil and gas, stand to lose revenue as a result.
Tom Manskey, director of economic development for Odessa, said prices that low, while beneficial at the gas pump, could injure the regional economy. In Odessa, a city of about 120,000, oil and gas is the dominant employer, he said.
“I would imagine it would have a negative effect on our region with regards to jobs and everything else,” Manskey said. “We’re in a very unpredictable economic time, and I think that’s just adding to it. There’s no predictability right now in the marketplace.”
Ray Perryman, an economist and founder of the Perryman Group, which conducts economic analyses across several Texas industries, suggested that if the price per barrel drops to $50, it would cause trouble and major market shifts with short and long-term impacts. Oil companies would change their practices and limit how much new oil is entering the marketplace, eventually driving the cost back up to make a profit, creating a volatile and unpredictable economic environment.
“If oil prices were to drop to $50 per barrel, the short-term effects are likely to be somewhat positive for many segments of the U.S. economy, but there would clearly be winners and losers,” said Perryman.
“In an area such as the Permian Basin, reducing activity in the oil and gas industry has substantial ripple effects on housing, retail in other areas,” Perryman said. “Because economic activity leads to tax receipts, an inevitable outcome is lower tax revenue to local entities.”
Other oil and gas industry leaders were bullish on the economy. While production will take a hit, existing drilling techniques will help operators continue to access an abundance of oil, said Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, an industry trade group. Horizontal drilling, for instance, allows operators to access larger reservoirs of hydrocarbons, reducing the need to drill new wells.
“A slight decline in production in 2026 would modestly pressure (state and local) budgets, but Texas’s robust economy and drilling efficiencies would help to mitigate statewide impacts,” Longanecker said.
Texas Oil and Gas Association President Todd Staples said in a statement that the current conditions don’t spell serious trouble for the industry.
“The Texas oil and natural gas industry has a long history of delivering essential products while navigating price volatility,” Staples said. “What we’re seeing today reflects market adjustment rather than distress, recognizing that companies are necessarily adapting to current and forecasted market conditions.”
Staples said efficiency and innovation allow Texas producers to remain competitive into the future.
In Texas, it takes at least $62 per barrel to cover the cost of drilling more oil and gas wells and still make money.
Anything below that that price, operators will make little — if any — money from their wells, said Dane Gregoris, managing director of Enverus, an energy analytics firm. And shareholders who have been pushing oil companies to become profitable would not see their demands met.
Despite Trump’s promise to “drill, baby drill, oil and gas production in Texas between December 2024 and October 2025 remained relatively flat, at 5.8 million barrels per day. The number of drilling rigs, which indicate whether there is an appetite to extract more oil and gas, also declined. Texas has lost 20 rigs since Trump took office, according to the company’s data.
“These companies would be in survival mode rather than thriving in this environment,” Gregoris said. “At $50 (a barrel), things look pretty dire, and then at $40, you’re looking at big cuts to capital budgets, likely big declines in crude oil production in the US, and a significant amount of sort of cash flow negative producers out there, which usually spells trouble for foreign investors in the space.”
Declining production could have damaging effects on regional economies that rely on the industry for its revenue and workforce. Companies, for instance, could lay off more workers who are a key tax base for Odessa, said Renee Earls, president and chief executive of the city’s Chamber of Commerce. If those workers spend less, the local economy slows.
“We’re all in the oil business, regardless of whether we work at a restaurant, in a chamber, or in a bank,” she said. “We’ve learned to always prefer stability.”
Earls, who has witnessed many booms and busts in West Texas, said she’d really start to panic if oil dropped to $40 a barrel.
Disclosure: Texas Oil & Gas Association has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
Great Job Texas Tribune, Carlos Nogueras Ramos & the Team @ KSAT San Antonio for sharing this story.
