Texas Petro Index

Click here to download pdf of the July Texas Petro Index

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Texas Petro Index: Revised Statistics Shed Additional Light on Upstream Industry Employment in Texas

July 2021 TPI up for 4th straight month but shows lower employment numbers than other prominent estimates

Sept. 7, 2021 – AUSTIN, Texas – The July 2021 Texas Petro Index, calculated using newly released Texas employment data, points to lower upstream oil and gas industry employment than other sources have published. Compared to the Texas Workforce Commission’s primary monthly estimates, the July TPI shows 9,000 fewer jobs, according to Petroleum Economist Karr Ingham, Executive Vice President of the Texas Alliance of Energy Producers.

“We believe our methodology provides a more accurate picture of statewide employment,” said Ingham. “The latest Texas Petro Index incorporates these revised employment estimates, along with updated statewide production data for crude oil and natural gas.”

The July TPI increased for the fourth straight month, and for the fifth time in the last six months, improving to 150.5 up from a revised 146.2 in June, but still down by 1.9% from the July 2020 TPI of 153.4. 

Calculating Accurate Employment Numbers

The most prominent estimates for Texas upstream employment are contained within the Current Employment Statistics (CES) series released monthly by the Texas Workforce Commission for two categories: oil and gas extraction, and oil and gas support activities employment.

“However, during times of rapid transition from growth to decline or vice versa, those estimates often diverge from what is actually occurring in statewide industry employment,” said Ingham. “And even though that is widely known to be the case, the CES data is only revised once a year to correct estimates that have potentially become significantly inaccurate.”

In addition, those numbers are not seasonally adjusted, making it generally improper to compare estimates for a given month to anything other than the same month in prior years. Finally, those headline CES numbers contain a handful of jobs that are not actually related to oil and gas.

The solution to these problems is to:

  1. Consult other less prominent data sets that allow for ongoing adjustment to monthly oil and gas industry employment estimates;
  2. Properly seasonally adjust the data; and
  3. Scrub out non-oil and gas jobs from the estimates.

To reconcile the data sets for the Texas Petro Index, the Alliance uses monthly data from the Federal Reserve Bank of Dallas, which makes these ongoing revisions, referred to as “early benchmarking.” Next, the Dallas Fed applies a two-step seasonal adjustment to the estimates. The Alliance then takes the additional step of removing the small number of non-oil and gas mining jobs from the estimates. 

“The result is a much more accurate, timely monthly estimate for upstream oil and gas employment in Texas,” said Ingham.  “Further, it makes it possible to render accurate estimates of cyclical employment gain or loss by allowing for the comparison of a given month’s estimates to any other prior month thanks to the seasonal adjustments applied by the Dallas Fed.”

July 2021 Employment Estimate

As previous releases have suggested, upstream oil and gas employment in Texas declined by over 83,000 jobs between December 2018 and September 2020, over 63,000 of which were lost from February to September 2020.  Since then, only about 8,800 of those jobs have been added back through July 2021, according to Ingham, pointing to industry employment recovery that is occurring more slowly than the Texas Workforce Commission monthly estimates would suggest. 

“The primary CES TWC estimates show total upstream employment of about 175,100 as of July 2021, and the addition of 17,600 jobs since the 2020 low point,” said Ingham. “In actuality, however, Texas oil and gas E&P employment is not that high, and we estimate statewide upstream employment at 166,100, some 9,000 below the monthly data published by the Texas Workforce Commission.”

Other TPI Indicators for July

The Texas Petro Index was revised downward in recent months with the release of the updated employment data, though the turning points in the TPI remain unchanged.  The index reached its downturn low point in January, marking the end of the contraction that began in early 2019. 

Six rigs were added on average in July, pushing the monthly average rig count to 225 up from 219 in June.  The number of drilling permits issued continues to increase steadily, with the total through July up by about 16% compared to the sharply lower numbers in 2020. Crude oil production growth slowed in July, though on balance both crude oil and natural gas production have and will continue to increase in response to improving market conditions.

Rising COVID numbers and the Delta (and now other Greek letters) variant are clearly cause for concern.  Sharp demand contraction is what pushed activity levels downward at an unprecedented pace last year. While not expected at this point, the possibility remains that a new surge of COVID nationally and internationally could weigh on petroleum energy demand and slow the recovery underway in 2021. 

“The post-COVID recovery has been somewhat tepid thus far compared to previous post-downturn expansions in terms of rig count and employment growth,” said Ingham. “The path of COVID going forward will almost certainly impact the pace of continued recovery.  Rising numbers are bearish for demand and prices, and improving numbers are positive for economic recovery and the improving energy demand that comes along with it.” 

The Texas upstream oil and gas economy faces a long climb to pre-downturn activity levels in terms of the Texas Petro Index, the rig count, and statewide industry employment, Ingham continued, and the nature of COVID going forward will shape the nature and pace of that recovery. 

About the Texas Petro Index

The Texas Petro Index (TPI) is a monthly measure of growth rates and cycles in the Texas upstream oil and gas economy. The TPI is calculated based on a comprehensive group of exploration and production (E&P) indicators, which include crude oil and natural gas wellhead prices, rig count, drilling permits, well completions, volume and value of Texas crude oil and natural gas production, and industry E&P employment. Karr Ingham, Petroleum Economist and Executive Vice President of the Texas Alliance of Energy Producers, created the TPI in January 1995 (based at 100.0) and releases it monthly. For more information, visit https://texasalliance.org/texas-petro-index/.

About the Texas Alliance of Energy Producers

Founded in 1930, the Texas Alliance of Energy Producers is the most knowledgeable and effective statewide oil and gas association in the nation. Serving nearly 3,000 members, the Alliance provides a voice for sound U.S. energy policy. These individuals and organizations – from small independents to publicly traded companies – are the driving force behind the U.S. energy renaissance. For more information, visit https://www.texasalliance.org/ and @TexasAllianceEP.