As of mid-2024, the Texas Oil & Gas Association’s monitoring of global, U.S. and Texas economies shows resilient growth projections for 2024 and 2025.
While economic indicators and expectations remain solid, the balance of economic and energy market risks has shifted, highlighting key assumptions that could impact global prospects.
Is the global economy on cruise control?
The IMF and other organizations have raised their economic growth expectations to near the world’s long-run average growth rate for this year and the next. The global economy has generally withstood high interest rates, relying heavily on the U.S. and China to drive half of global GDP growth this year.
However, consumers are central to the outlook, and their perceived wealth and prospects are crucial to the broader spending and growth outlook. Notably, U.S. household debt eclipsed $17.5 trillion to start this year, while credit card, auto loan and mortgage delinquencies have risen due to the cumulative stress of price inflation. In turn, persistent price inflation has kept the U.S. Federal Reserve cautious about cutting the federal funds rate, and high interest rates have supported a historically strong U.S. dollar exchange value versus other currencies. This matters to economic growth and energy markets because an exceptionally strong U.S. dollar has historically widened our trade deficit, which directly lowers GDP growth. It also made U.S. O&G exports which are traded in U.S. dollars relatively more expensive to our trading partners. The U.S. trade deficit has run at an annualized pace of nearly $1 trillion so far this year, compared with pre-pandemic levels of less than $600 billion in 2018 and 2019 — and this was the largest drag on U.S. real GDP growth in Q1 2024.
China’s economic news has been mixed, with growth in services but contractions in goods and exports. The IMF’s projections for China’s 2024 real GDP growth were upgraded from 4.1% year-over-year (y/y) in January to 5.0% y/y by the end of Q2 2024. Given China’s significant share of the global economy, these upgrades added 0.2% to global GDP growth, underscoring the relationship between strong global economic growth and oil demand.
Record demand, geopolitical uncertainties but no apparent shortages
Since each percentage point of global growth has historically corresponded with oil demand growth of roughly 500k b/d, the IMF’s GDP outlook suggests that the world could require roughly 1.3 million b/d (mb/d) more oil this year than it did in 2023. The EIA currently projects global oil demand growth of 1.1 mb/d in 2024 and 1.8 mb/d in 2025, which is in the top 25% of global annual demand growth over the past 25 years.
So far this year, long-lead projects in Brazil, Canada and Guyana have added 1.0 mb/d to global supply compared to a year ago. Additionally, U.S. production has added over 500k b/d y/y.
Texas and the Permian Basin warrant a global focus
U.S. supplies have largely grown due to the Permian Basin’s robust performance. EIA estimates through June 2024 show y/y productivity increases in major Texas basins, including Anadarko (+20.7% y/y), Eagle Ford (+24.5% y/y), Permian (+21.9% y/y) and Haynesville (+15.3% y/y). The Permian Basin’s output in June 2024 was 6.2 mb/d of crude oil and over 25 bcf/d of natural gas, with roughly 70% coming from Texas and 30% from New Mexico.
TXOGA’s projections through June 2024 indicate that Texas’ production remains strong, with 5.65 mb/d of crude oil, 3.7 mb/d of NGLs and 32.2 bcf/d of natural gas marketed production. Texas accounted for 42.9% of U.S. crude oil and 28.3% of U.S. natural gas marketed production in the first half of 2024. Texas refineries have also recently broken records, with net production as high as 5.5 mb/d in March 2024, supporting five consecutive months of petroleum product exports exceeding 4.0 mb/d.
That’s a lot of numbers simply to say that relatively middling global economic growth has continued to generate a strong pull for O&G from the U.S., powered by Texas. As global demand for energy and consumer goods rises, Texas continues to lead in production and innovation. The Permian Basin’s growth and record outputs in O&G and refined products underscore Texas’ pivotal role in energy security and affordability.
TXOGA’s analyses reveal that the molecules essential to 96% of consumer goods originate from O&G, solidifying Texas’ position in national and global economies. In an era of economic and geopolitical uncertainties, Texas not only drives growth but ensures the accessibility and affordability of modern life’s foundational elements. The Lone Star State’s relentless pursuit of excellence in energy production reaffirms its status as an indispensable global energy leader, poised to navigate and shape the future of energy dynamics.
For more information, visit txoga.org.
