Dallas Fed: Energy Sector Growth Strong, But Permian Challenges Remain

Dallas Fed: Energy Sector Growth Strong, But Permian Challenges Remain
The Dallas Fed's latest quarterly energy survey reveals a record business activity index.

The business activity index rose to its highest level since 2016, fueled by the expansion of the energy sector, according to the Federal Reserve Bank of Dallas (Dallas Fed) 2Q Energy Survey.

In its quarterly survey of oil and gas executives in E&P and oilfield services in the Eleventh District (Texas, northern Louisiana and southern New Mexico), the Dallas Fed saw the business activity index rise to 44.5 in 2Q, up from 40.7 in 1Q.

Despite robust growth in the second quarter, a healthy labor market and a growth in activity, some survey respondents indicated potential impediments that could limit activity in the Permian Basin and other areas soon.

“These concerns were particularly strong in the Permian Basin, where many executives mentioned limited crude oil pipeline capacity and problems finding workers as issues that might constrain activity,” Dallas Fed senior economist Michael D. Plante noted in a release.

Of respondents whose firm is primarily active in the Permian, lack of crude oil pipeline capacity was reported as the biggest hindrance to near-term growth in activity (55 percent) followed by problems finding workers (52 percent) and cost inflation (42 percent).

The survey also found that 31 percent of oil and gas executives in all regions said their firms were having problems hiring. Of those firms, 63 percent indicated they were having the most difficulty finding mid-skill positions (which typically require some college, technical schooling or work experience). Additionally, 83 percent said the main reason was a lack of available applicants or no applicants. Forty-five percent indicated they were using wage increases and/or benefits as a way to recruit and retain talent. 


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