Dallas Fed Energy Survey: Expansion continues in oil and gas activity; cost pressures building | KLBK | KAMC
A pumpjack sits on the outskirts at dawn in the Permian Basin oil field in Midland, Texas. (Photo by Spencer Platt / Getty Images)
DALLAS (PRESS RELEASE) – The following is a press release from the Federal Reserve Bank of Dallas:
Solid growth in the oil and gas sector continued into the third quarter of 2021, according to oil and gas industry executives who responded to the Dallas Fed Energy Survey.
“Business grew solidly for the quarter and survey responses generally indicated continued improvement in the sector,” said Michael Plante, senior research economist for the Dallas Fed. “However, cost pressure has increased as many companies report rising input and labor costs.” [Download Audio Quote from Michael Plante]
Other key takeaways from this quarter’s survey:
- The business activity index was 44.3, indicating strong overall growth.
- Oil production rose during the quarter, but the pace of expansion slowed noticeably. The oil production index was 10.7 compared to 35.0 in the previous quarter.
- The input cost index reached a further record high of 60.8 and thus exceeded the record value of 56.0 in the previous quarter.
- The expectations of natural gas prices have risen sharply. On average, respondents expect Henry Hub’s spot prices to exceed $ 4.70 per million British Thermal Units (MMBtu) by the end of the year, up from $ 3.10 in the previous survey.
Companies report problems finding workforce in the last quarter
In a number of special questions, asked companies about expectations for electric vehicle sales in the US, purchase of emission allowances and / or carbon offsets, operational delays caused by COVID-19, and recruitment challenges.
“The search for labor has been a problem across the economy and the oil and gas sector is no exception,” said Plante. “Of oilfield service companies, just over half said they had difficulty recruiting in the third quarter. The lack of qualified applicants was the most frequently chosen reason for these difficulties. ” [Download Audio Quote from Michael Plante]
Other important insights from the results of this quarter’s special questions:
- Executives expect EV sales to pick up by the end of this decade; The most frequently chosen answer was that by 2030 10-19 percent of all US new car sales will be plug-in electric.
- The use of CO2 offsets and / or credits is quite limited among the respondents. Only 3 percent say they will buy them, while another 10 percent are considering doing so in the future.
- Work stoppages related to COVID-19 were widespread, but typically minor. 53% of executives reported minor delays or disruptions in operations; another 17 percent have significant delays or disruptions.
The survey examines oil and gas companies based in the eleventh Federal Reserve District – Texas, southern New Mexico and northern Louisiana. Many operate nationally and worldwide.
The data was collected from September 15-23 and 142 energy companies responded. Of those surveyed, 95 were exploration and manufacturing companies and 47 were oilfield service companies. More information is available at DallasFed.org.
(Federal Reserve Bank of Dallas press release)
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