ICYMI – Dallas Fed Energy Survey uncertainty index highest in five years

The Dallas Fed Energy Survey is a quarterly survey conducted by the Federal Reserve Bank of Dallas that provides insights into the oil and gas sector, particularly in the Eleventh Federal Reserve District, which includes Texas, northern Louisiana, and southern New Mexico — a key region for U.S. energy production.

The latest survey was released Wednesday and the full report can be found here:

• Dallas Fed Energy Survey

Highlights:

• The business activity index, the survey’s broadest measure of the conditions energy firms face in the Eleventh District, remained in positive territory but declined slightly from 6.0 in the fourth quarter 2024 to 3.8 in the first quarter.
• company outlook index decreased 12 points to -4.9
• outlook uncertainty index jumped 21 points to 43.1, the highest since Q1 2020, the beginning of the pandemic
• oil production index moved up from 1.1 in the fourth quarter to 5.6 in the first quarter
• natural gas production index turned positive, rising from -3.5 to 4.8
• Among oilfield services firms, the input cost index advanced, from 23.9 to 30.9
• Among E&P firms, the finding and development costs index increased, from 11.5 to 17.1
• aggregate employment index edged down from 2.2 in the fourth quarter to zero in the first quarter. This suggests employment was unchanged in the quarter. The aggregate employee hours index was relatively unchanged at 0.7. Meanwhile, the aggregate wages and benefits index was also relatively unchanged at 21.6.

Some of the comments received from respondents are indicative of that rising uncertainty, link to those is here. For example:

• trade and tariff uncertainty are making planning difficult
• administration’s chaos is a disaster for the commodity markets. “Drill, baby, drill” is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn’t have a clear goal. We want more stability.
• tariffs immediately increased the cost of our casing and tubing by 25 percent
• “Drill, baby, drill” does not work with $50 per barrel oil. Rigs will get dropped, employment in the oil industry will decrease, and U.S. oil production will decline as it did during COVID-19.

One comment I saw from an analyst dismissed the comments by saying there is never certainty. Which is correct, but ignores that the uncertainty level is at its highest in five years and will have implications.

This article was written by Eamonn Sheridan at www.forexlive.com.