More than three out of four executives in the oil and gas industry say the potential election of Democrat Joe Biden in the upcoming US presidential election is “a threat to their companies’ economic wellbeing”, according to a survey of members of the Texas Oil and Gas Association (TXOGA).
Overall, association members are optimistic about the prospects for global economic growth, suggesting that May 2020 was a low point for oil prices and for the world economy. Most respondents predicted oil prices will be higher next year.
But the survey, conducted by the University of Houston Hobby School of Public Affairs, working with TXOGA and covering the upstream, midstream, downstream and service sectors, found that association members view a potential Biden victory as comparable to a continuing oversupply and weakened demand for oil and gas.
Among respondents, 76 per cent said they have a “great deal” or “good deal” of concern over the potential threat a Biden election represents to their company’s future economic growth; 75 per cent said the same about a continued glut of oil and natural gas and 73 per cent said that about continued weak demand.
Just 11 per cent view Donald Trump’s potential re-election as a threat to their business.
Sen. Kirk P. Watson, founding dean of the Hobby School, said the survey offers insight into how one of the state’s critical industries is adjusting to the global threat of the coronavirus and the resulting recession.
“Efforts to slow the spread of the virus caused a dramatic drop in demand for oil and gas, and demand remains lower even as Texas and the rest of the U.S. begin to reopen,” Watson said. “But energy executives are concerned about issues beyond supply and demand.”
The survey is part of a series conducted by the Hobby School to determine how the COVID-19 pandemic has affected various sectors of the Texas economy.
“Both Houston and the state have worked to diversify their economies, but oil and gas still has a major impact on almost all aspects of the economy, from employment to charitable giving,” said Pablo M. Pinto, a political scientist and director of the Center for Public Policy at the Hobby School.
“What happens within the industry has major implications for the entire state.”
Taxes on oil and gas production, along with a 20 cent-per-gallon gasoline tax, contribute billions of dollars annually to the state’s general revenue fund, the Rainy Day Fund and a fund for highway construction and maintenance. Those tax receipts are down substantially in 2020.
Association members predict oil prices will rebound by 2021, although their expectations stop well short of record prices. The median prediction for West Texas Intermediate is between $40 a barrel and $49 a barrel by May 2021; the median prediction for Brent is between $50 and $59 by May 2021. Prices ranged from $26 to $37 when the survey was conducted between May 12 and 27.
Among other findings:
- 70 per cent said the global economy will improve over the next 12 months; just 15 per cent expect it to worsen, and another 15 per cent say it will remain about the same.
- 68 per cent said they are concerned about the impact a global and U.S. recession would have on their companies.
- 19 per cent said their companies had laid off or furloughed employees. 14 per cent said their companies had reduced retirement or health benefits.
- Despite the concern about Joe Biden, just 22 per cent and 25 per cent respectively are concerned about the prospect of government policies to lower emissions and the popularity of clean energy.
The full results are available on the Hobby School website.
Mark P. Jones, a research associate at the Hobby School and a political science professor at Rice University, noted that although fewer than 20 per cent of respondents said their companies had laid off or furloughed employees, more than three out of four said their companies have cut philanthropy and other types of community outreach.
“And while as a group they are optimistic about the future, it is clear that they are also concerned about the presidential election and the continued imbalance between supply and demand,” he said.
Renée Cross, senior director of the Hobby School, added that despite their relatively optimistic views, association members signalled support for several potential policy actions from the state and the Texas Railroad Commission, which regulates oil and gas production in the state.
“Almost nine out of 10 people said property tax relief would help their companies survive and thrive in these difficult times,” Cross said.
“And nearly two-thirds said that extending existing Railroad Commission waivers would help to weather the COVID-19 and oil price crises.”