Economist Ray Perryman addressed legislative staffers and community members on Monday at the West Texas Food Bank, providing insights into the current state of the economy in the Permian Basin, Texas, and the nation. His analysis highlighted both challenges and long-term opportunities within the oil and gas sector, along with broader economic factors such as tariffs and immigration.
Perryman, President and CEO of The Perryman Group in Waco, pointed to rising steel costs for pipes and oilfield equipment, which have increased by 25%, as a significant impediment to industry growth. He also noted that increased production in other countries and a general slowdown in the global economy are contributing to a “tipping point” where current oil prices in the low $60s provide marginal profit but insufficient incentive for major expansion.
Despite these short-term challenges, Perryman emphasized the positive impact of horizontal drilling and fracking technologies on production efficiency. He explained that these advancements allow for accessing resources from multiple locations using a single well platform. Newer technologies even enable adjustments to horizontal drilling plans after initial exploration, further optimizing production and sustaining record output levels with fewer active rigs.
Perryman acknowledged a current “soft patch” in the area’s economy but expressed confidence in long-term demand and production. He attributed the present situation to a convergence of factors, including tariffs on steel, softened global demand, and increased production from OPEC nations. While industry layoffs are occurring, particularly at the office level, Perryman noted that overall employment in the Texas oil and gas industry decreased by only 500 jobs last month, a relatively small number compared to historical downturns like the 1980s.
Speaking at the West Texas Food Bank, Perryman stressed the critical need for funding food banks, citing studies demonstrating the significant economic consequences of hunger and food insecurity. He highlighted the detrimental effects on health, education, job productivity, and overall life expectancy. Perryman argued that fully supporting these programs is economically sound, providing returns estimated at 30 times the investment.
Turning to tariffs, Perryman explained that they are taxes paid on goods entering the country, impacting both businesses and consumers. He suggested that while merchants may initially absorb some of the tariff costs, consumers will ultimately bear a larger share. Perryman estimated that if current tariff levels remain or increase, consumers could be paying for approximately 80% of the tariff costs by the end of the year.
Regarding immigration, Perryman emphasized the vital role immigrants play in key sectors of the Texas economy. He noted that immigrants comprise 50% of the agricultural workforce, 40% of the construction workforce, and 35% of the hospitality workforce. He argued that restricting access to this workforce would severely hinder economic growth in the state. He also highlighted the significant presence of immigrants in healthcare and high-tech industries, comprising 25% of doctors, nurses, and healthcare professionals, and 49% of PhD engineers in Austin’s high-tech firms.
