Negative Outlook for Oil Service Sector from Texas Business Owners

Drilling rig/Getty Images

Drilling rig/Getty Images

Last month, a survey conducted by the Fed indicated that business owners are becoming increasingly pessimistic about the Texas economy in the face of declining oil prices.

The Houston market has been affected the most by the oil price decline (compared to other cities in Texas like Dallas-Forth Worth, Austin and San Antonio) because it is the most energy dependent.

“Oil prices are increasingly impacting our business. An increasing number of customers are delaying or canceling purchases,” said an executive for a vehicle parts dealer. “We are not in a desperate situation but are measurably affected.”

The Fed’s activity index fell from 15.2 from December to 5.2 in January, an indication that while the sector saw growth, the rate slowed this month.

Similarly, the general business activity index, which broadly measures the perception of economic conditions, plummeted from 12 points in December to -10.4 last month. Other indexes tracking pessimism from business owners also showed negative outlooks among their responses.

“Both [the oil and gas] sectors have seen their selling prices decline 70 percent in the last year. This morning’s forecast says prices could fall another 10 percent,” said an executive with a financial services firm. “We are adjusting to customer demand for operating equipment, which has decreased to match the selling prices of their products.”
There are no signs of improvement in the immediate future for Texas markets.

Article written by HEI contributor Aliyah Cole.

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