When President Donald Trump boasted about falling oil prices on social medi
a early Monday, the Texas oil and gas industry didn’t cheer along with him.
Trump’s latest round of tariffs set off unease among industry groups representing Texas operators. Trade leaders said Trump’s a
ctions threaten the industry’s ability to continue meeting global oil demand.
“Depending on the length and severity, many companies within, and reliant upon, the Texas oil and natural gas industry could struggle,”
said Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association.
Texas is a dominant force in the nation’s oil and gas industry, supplying more than 40% of its oil and producing more natural g
as than it can store, transport or sell. Oil and gas companies drill for enviable amounts of crude oil from thousands of wells in the
westernmost region of the state, federal data shows, with no signs of slowing — until this week. Oil prices fell below $60, the lowest in years.
Most of it is drilled in the Permian Basin, a stretch of land containing oil deposits scattered across tens of thousands of square miles
where operators big and small produce oil. The region’s very economy hinges on oil an
d gas, which brings workers, grows the tax base and enriches local and county government budgets.
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Many of the companies depend on imports targeted by tariffs to sustain their field operations, trade groups said.
[Cruz says a trade war would cost jobs, spur prices and be terrible for Texas]
Operators prioritize domestic purchases, Longanecker said, but also rely on international products. At least half of critical equipme
nt, including casing that protects drilling equipment, is sourced internationally. Steel, both domestic and international, can take up to
0% of a company’s expenses. Up to 70% of the less critical materials used to drill, such as casing string on the surface, come from Sout
h Korea. He said U.S. steelmaking is often reserved for more critical profitable equipment.
One of the companies they represent exclusively uses domestically produced equipment, which is rare. And only sucker rods, whic
h connect equipment on the surface to pumps deep in the well, are 100% sourced domestically.
“Our members procure this material from both domestic and international suppliers, and maintaining the supply diversity is important to control costs and availability,” Longanecker said.
Supply chain disruptions and policy decisions can significantly change these costs for operators. If the tariffs lead to an economic downturn, it could also affect demand and deal a blow to the industry.
Ben Shepperd, president of the Permian Basin Petroleum Association, said tariffs will hurt operators’ bottom line.
“Our goal has been to consistently remind policymakers and others that our operators are participating in a global market that has benefited greatly from expanded markets and free trade,” he said. “This also means that our industry is challenged with the effects of regulatory certainty or uncertainty and is vulnerable to the effects of tariffs and inflation.”
