The Federal Reserve Bank of Dallas concluded Wednesday in a survey of the first quarter of 2023 that oil and gas sector growth has declined in recent years.
The bank’s activity index fell from 30.3 to 2.1 in the fourth quarter of 2022, according to Reuters. The outlook index dropped 27 points, falling to negative 14.1.
“Growth in the oil and gas sector stalled out,” reads the report on the first quarter.
Survey respondents representing oil and gas firms said that rising costs have been detrimental to growth.
“Inflation pressures appear to be moderating slightly, but we still have a long way to go,” said one respondent, via UPI.
The survey was based on responses from 147 energy firms and data collected between March 15 and March 23. During that time, oil prices decreased amid concerns about the banking industry.
Another respondent said there has been a 40% cost increase for certain oil and gas operations and that there has been a “noticeable lower cash flow” as a result of “an estimated 30–40 percent cost increase in field operations, increased interest charges on borrowed money, a drastic collapse in natural gas prices combined with lower crude oil prices,” reported Reuters.
Prices had fallen to $64 per barrel when the survey was initially taken in mid-March, but the average price per barrel of West Texas Intermediate (WTI) was $73 on Wednesday, per UPI.
According to the report, survey participants expect that the price will rise to $80 by the end of 2023.
“Volatility in commodity markets and recent banking turmoil continue to play into business dynamics and are leading to a reduction in spending plans. The dramatic pullback in natural gas prices has also led to a decrease in appetite to target gas prospects and has also led to some optional gas-rate curtailments,” said a survey respondent, via Reuters.
“We are holding steady at current revenue,” a manufacturing sector respondent said, per UPI. “However, there are many uncertainties that are causing us to be extremely cautious.”
Meanwhile, inflation is three times above the 2% aimed for by the Federal Reserve, while wholesale prices continue to decline despite the Fed increasing interest rates.