Texas, Louisiana, and New Mexico experienced a slight reduction in oil and gas sector activity in the second quarter of 2025, according to recently released Dallas Fed survey results.
The Dallas Fed showed that a rise in steel tariffs has contributed to a slowdown in the sector. Around 25% of the steel used in the United States is imported.
Volatile energy prices characterized the second quarter amid the brief tit-for-tat attacks between Israel, the United States, and Iran. At one point, U.S. crude futures fell to a four-year low of $57.13 a barrel on May 5. However, by June 18, prices shot up to $75.14, the highest level since January.
As oil prices retreated, oil and gas production fell slightly. Nearly half of the Dallas Fed survey respondents reported they expect to drill fewer wells in 2025 than initially planned at the start of the year. A quarter of executives expect the number of wells they drill to decrease significantly.
At least one survey respondent pointed to the harm that an increase in output from members of the Organization of the Petroleum Exporting Countries (OPEC) has had on domestic U.S. activity.
“Drill, baby, drill will not happen with this level of volatility. Companies will continue to lay down rigs and frack spreads,” said one respondent, per BOE Report.
The Dallas Fed survey showed that costs for oilfield service firms rose slightly faster in Q2 compared to the first quarter of 2025. One oilfield service firm executive stated that higher costs resulting from steel and aluminum tariffs are being passed on to customers.
“The numerous negative tailwinds — tariffs, oversupply of oil, consolidation and turmoil surrounding economic policy — will have significant impact on the domestic energy sector… A lengthy downturn is the logical outcome,” an executive noted.
The somewhat gloomy conclusions from the Dallas Fed contrast with the recent data released by the Energy Information Administration. According to the EIA, U.S. crude oil production reached a record 13.47 million barrels per day in April, up from the 13.45 million barrels per day recorded in March.