The state of Texas’s economy is facing many challenges. High oil prices, population growth, and diversification are among them. Texas has adapted to new realities while maintaining its competitiveness. In this article, we’ll explore the factors affecting the state’s economy. Ultimately, these factors will help the state thrive.
High oil prices
High oil prices and newly found oil and gas reserves have helped Texas’ economy in recent years. High oil prices insulated state and local government budgets from the recession, and they helped keep unemployment at historically low levels. The oil and gas industry also boosted the state’s image as a land of wealth. The report found that three of the four long-term oil price scenarios would result in a decline in state and local government funding.
While oil prices have declined since their peaks earlier this year, they are still above last year’s prices. Although the price of oil is down from its peak, it remains high enough to hurt motorists, but not low enough to wipe out the Texas economy. Still, oil prices remain high enough to limit future oil-field activity.
Oil prices have increased by about 10 percent in the past decade, according to the Dallas Fed. The increase in oil prices has led to a 0.5 percent increase in Texas’ gross state product, and it has increased the number of jobs. Moreover, recent development of shale deposits has contributed to Texas’ oil and gas production.
Recent futures prices are expected to remain near $90 per barrel through spring of next year. After that, daily volumes of contracts will thin out. OPEC is likely to prevent the recent drop in prices and will keep the current level. However, the outlook for demand for oil is still uncertain. Moreover, the ongoing war in Ukraine is a major supply factor. Russian exports have decreased by 580,000 barrels a day since Ukraine’s invasion. Europe is expected to tighten sanctions against Russia in the coming months, and that could result in a sharp rise in oil prices.
The new financial model for oil should stabilize the price of oil. However, the oil industry is unlikely to respond favorably to the new price volatility. The result could be lackluster economic growth.
Diverse industries
A diverse economy is one that is less prone to the stresses of an industry-specific recession. However, diversity alone cannot shield an economy from a broad recession. During the recent financial crisis, high diversity in Texas and the Dallas-Fort Worth area did not protect these regions from the impact of the recession. Rather, they bounced back faster than the U.S. economy overall.
Although agriculture and oil remain important in the Texas economy, other industries have grown in importance. For example, financial services and aerospace and aviation are growing in Dallas and Houston. Increasingly, out-of-state corporations are operating in Texas, which reflects the increasingly interconnected national economy. These industries also have a strong presence in the Dallas-Fort Worth metro area.
In addition to oil and gas, Texas is a leader in information technology and other industries. Its infrastructure and connectivity to the rest of the nation are key to its continued growth. With a total of 313,200 miles of public roads, 10,400 miles of rail, 380 airports, and 16 seaports, Texas is well positioned to remain a top exporter. With its robust industrial sector base, Texas has a positive outlook for the future.
Texas is also a leader in advanced manufacturing and technology. Its high-technology sector has produced products such as the integrated circuit and handheld calculator. These new technologies attract global companies. Texas is also home to the Army Futures Command, which focuses on science and technology development for the U.S. military.
Dallas and Austin both boast a large educated workforce, which attracts high-tech companies. El Paso, meanwhile, has a mature government presence, anchored by sprawling Fort Bliss, but vulnerable to federal budget cuts. The presence of large military medical facilities in the region also helps the health and biomedical industries grow.
Population growth
The rapid population growth in Texas is a major driver of the state’s economy. While some boosters claim that this growth is a result of public policies, the reality is that most of the growth has come from natural population growth and international immigration – mainly from Mexico. This growth has fueled job creation and increased demand for goods and services, including education. Schools and businesses have expanded to accommodate the new residents.
While Texas’s economic growth has benefited most Texans, it has not helped everyone equally. Since 1988, the share of students categorized as low-income has increased from 35% to 61%. Also, Texas’s population is aging. This means that older Texans are more likely to use health care than their younger counterparts, which puts pressure on the state budget and on families.
While Texas’ economy has become increasingly diverse over the years, it still relies heavily on its abundant oil and gas resources. While this oil and gas wealth has helped the state, many Texans have failed to benefit from it. Currently, the state has the 11th highest poverty rate in the country. This makes the state’s economy an unlikely model for the rest of the country.
Nonetheless, Texas continues to benefit from a growing technology sector. Several technology companies have relocated from coastal cities to the Lone Star State. Tesla will move its headquarters to Austin by 2021, and Samsung is expanding its footprint across the state. In addition, vaccination rates in Texas have rebounded, as has the state’s relaxed laws regarding pandemics.
The rate of population growth is a popular indicator of economic health in the U.S. It is worth noting that Texas has grown by more than three million people since the 2010 Census. In comparison, the state’s population growth has been twice as high as the national average in the last decade. While Texas’ largest metro areas continue to have younger populations, rural areas are experiencing aging. Indeed, 163 of the state’s 254 counties have median ages that are significantly higher than their state average.
Taxes
Texas’s low income tax rate is one reason it’s so popular among companies. It allows companies to keep more of their earnings for themselves, which is good news for the state’s economy. In addition, the state has many incentives for businesses, including diverse financing options and incentives for job training.
The state has a diverse economy, including healthcare and technology sectors. Its oil industry has driven its growth in the last decade, though the recent decline in energy prices has slowed Texas’ growth somewhat. The housing bubble in California wreaked havoc on both states, but Texas’s property tax bill only makes up 8% of the Gross State Product.
The Institute for Taxation and Economic Policy tracks tax data for all 50 states and the District of Columbia. Its latest findings are expected to be released later this year. According to the institute, Texans in the bottom 20 percent of income spend about 13 percent of their income in state and local taxes, while the top one percent pays only 3.1 percent of their income.
Taxes are also a major source of funding for the Texas economy. As one of nine states without a general personal income tax, Texas relies on sales and excise taxes, which account for 50% of the state’s tax revenue. Furthermore, Texas’s sales and excise taxes are 23 percent higher than the national average and the 10th highest in the country.
Texas’s tax collection is also booming. In fiscal 2021, the state collected $77.2 billion in tax revenues, up by 25.6% from the previous year. Texas’s sales tax revenue grew more than inflation in August, and the oil and gas mining industry continues to drive up sales tax receipts.
