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A Record for the Texas Petro Index

The Texas Petro Index is put out by the Texas Alliance of Energy Producers, an organization that represents the interests of the oil and gas industry in Texas with the state and federal government. The TPI is a composite index of upstream economic indicators and was created by economist Karr Ingham. The index is updated by Mr. Ingham and released each month. Late this summer, in July and August 2013, the index hit record highs. The previous records occurred in September and October of 2008. The July 2013 index was up 4.4% from the same month in 2012, and in August 2013 the index increased 4.6% from August 2012.

Contributing to these record numbers were upward revisions in Texas oil production numbers. Crude oil production was up 16.7% from the previous year, and oil prices remained high and hit $100 per barrel on average in July 2013. In August 2013 the price per barrel was 13.7% higher than in August 2012. The increase in oil prices resulted in an increase of 32.8% in the value of oil produced in Texas compared with 2012. For natural gas, production decreased from 2012 by about 5.8% but higher wellhead prices, which were as much as 14.1% higher than in 2012, more than offset the lower production. The net value of gas produced in Texas increased by 7.5%.

Employment numbers in the oil and gas industry have also been positive. Earlier this year, the number of workers in the Texas oil and gas sector hit 282,700, which is also a record according to the Texas Workforce Commission.

The Texas Petro Index reported that fewer drilling permits were issued this summer. In August 2013, state regulators only issued 1,606 permits, which is the smallest number for the month of August since 2009. This could have a dampening effect on the numbers in the coming months, although the Texas rig count rose slightly but steadily throughout 2013, and Mr. Ingham noted that each rig creates economic activity around it. The rig count was lower than it had been at the same time in 2012 by 5.9% according to numbers published by Baker Hughes Inc.. Mr. Ingham noted that the rig count is an important upstream indicator and it shows a positive correlation with oil prices, in that as prices go up so does the rig count.

Mr. Ingham said: “Ultimately, crude oil pricing will determine the direction of the TPI over the coming months; if prices remain above $100 per barrel-or even in the $90-$95 per barrel range-the rig count will continue its steady improvement, drilling permits will stabilize or increase, and the industry will continue to add jobs. And at this point, all of that seems very likely.”

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