The following was written by Dean Foreman, Ph.D., Chief Economist at the Texas Oil & Gas Association (TXOGA):
Jeremy Foley, the former athletic director at the University of Florida, famously said, “What must be done eventually, should be done immediately.” That mindset—swift action in the face of inevitability—doesn’t seem to be the rule in today’s global economy. The International Monetary Fund (IMF) and other forecasters who began 2025 bracing for a near-term economic shock from trade policy changes have since pushed their expectations for the biggest impacts further into the future.
The result is a strange kind of holding pattern. Market participants are leaning into a “soft landing” narrative, yet data like August’s Producer Price Index (PPI) can quickly rekindle concerns over inflation and uncertainty. The crux for the U.S. outlook is whether financial markets—especially equities—can continue setting record highs and, in turn, help sustain consumer spending. With valuations stretched and corporate profits needing to absorb rising intermediate product costs, the outlook is far from clear.
Global, U.S., and Texas Economies – Delayed Impacts, Lingering Risks
The IMF lifted its 2025 global GDP forecast by 0.2 percentage points to 2.6% (market exchange rate basis), citing stronger trade and financial conditions. Even so, risks persist—from large fiscal deficits in countries like the U.S., France, and Brazil to ongoing geopolitical tensions and volatile trade policy.
In the U.S., the ADS Business Conditions Index points to stalled GDP growth in Q3, even after a rebound in Q2. Household debt climbed to a record $18.4 trillion in Q1, with student loan delinquencies nearing 13% after the end of forbearance. This strain on consumers—who drive about 70% of GDP—could weigh on spending if credit access tightens.
Meanwhile, a weaker U.S. dollar continues to support oil prices, underscoring the historically strong inverse relationship between the two.
Global Oil Market – Records in Demand, Divergence in Supply
The U.S. Energy Information Administration’s (EIA) August update raised its global oil demand forecast again, now projecting three consecutive records: 102.7 mb/d in 2024, 103.7 mb/d in 2025, and 104.9 mb/d in 2026. U.S. refined product demand is up 0.8% year-to-date, led by diesel and jet fuel, with Gulf Coast crack spreads remaining healthy.
On the supply side, EIA projects global production growth to exceed demand in 2025 and 2026, led by non-OPEC producers such as the U.S., with additional contributions expected from OPEC and Russia. This balance underpins EIA’s forecast for Brent crude to shift from about $65 today to an average of $67/bbl in 2025 before declining to $51/bbl in 2026.
TXOGA does not predict prices—but EIA’s projected decline would imply Saudi Arabia and Russia increasing output above recent levels while holding back from the full 2.2 mb/d increase that OPEC+ announced in May. Given current production restraint and the risk of expanded sanctions on Russia, this outcome remains uncertain.
At the same time, U.S. crude oil inventories—both privately held and in the Strategic Petroleum Reserve—remain historically low. Without a major economic downturn, mean reversion analysis suggests more upside than downside for prices from current futures levels.
Natural Gas Markets – Strong Supply Meets Seasonal Price Pressure
Global natural gas demand reached a record 148.7 trillion cubic feet in 2024 and is expected to rise another 1.8% in 2025, with roughly 75% of the growth coming from emerging markets, especially in Asia. North America is poised to supply about 85% of the incremental LNG capacity in 2025, led by Texas and Gulf Coast projects.
In the U.S., EIA now projects marketed natural gas production at 116.8 bcf/d in 2025—higher than earlier estimates—with exports climbing 24% year-on-year to 15.5 bcf/d. Texas accounted for nearly 30% of total production through July, supported by 1.5 bcf/d of LNG export capacity being commissioned and 6.5 bcf/d under construction.
Working gas in storage is in the top 20% of the five-year range, tempering near-term prices even as the futures curve signals higher prices next winter. While oil prices hinge on global balances, natural gas remains heavily influenced by seasonal and regional dynamics.
Last quarter, markets anticipated slower Permian associated gas output and increased dedicated gas drilling to meet demand. That trade has since unwound, with EIA’s revised outlook reflecting stronger associated gas production. If U.S. oil output remains robust, this could keep natural gas prices in check—barring weather-related spikes or LNG supply disruptions.
Texas Productivity – Rock Steady in Shale
Rig productivity remains one of the clearest indicators of shale’s health, and Texas continues to post gains despite fewer active rigs. In July, EIA estimated productivity up 3.9% year-on-year in the Permian and 2.5% in the Eagle Ford.
Production curves across Texas basins remain stable, with July output up 3.7% in the Permian, 1.4% in the Eagle Ford, and 11.1% in the Haynesville from a year earlier. This stability—despite a lower rig count—highlights the efficiency gains and operational discipline that continue to define Texas oil and natural gas.
The Common Thread – Stability Amid Uncertainty
One theme emerges across the data: Texas oil and natural gas remain steady in a volatile global environment. Economic risks—from fiscal and geopolitical pressures to potential shocks in consumer demand—are real, but the fundamentals of energy demand and Texas’ capacity to meet it have not wavered.
The broader economic conversation may focus on delays, uncertainty, and shifting forecasts, but the industry’s ability to meet record demand—efficiently and reliably—is a rare point of stability.
In this environment, discipline, continued investment in capacity and infrastructure, and readiness for sudden changes will remain critical. That steadiness has been, and will continue to be, a competitive advantage for Texas and the United States in the global energy economy.
Thank you for your attention. You can read the full Q3 Quarterly Energy Economics Outlook at Economics – Texas Oil & Gas Association.