Dallas Fed Energy Survey: Activity contracts slightly, uncertainty remains elevated

DALLAS—Oil and gas activity contracted slightly in the second quarter of 2025, according to oil and gas executives responding to the Federal Reserve Bank of Dallas’ Energy Survey.

The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—came in at -8.1, suggesting a decline in activity since the last survey.

“Conditions deteriorated for companies in the oil and gas sector this quarter, with survey responses pointing to a small decline in overall activity as well as oil and gas production,” said Michael Plante, an assistant vice president at the Dallas Fed.

Key takeaways:

• Employment and employee hours both declined slightly this quarter. The employment index was -6.6 vs. 0 in the first quarter of 2025. Employee hours declined to -5.1 from 0.7.
• Oil and natural gas production also edged down this quarter. The oil production index was -8.9 vs. 5.6 last quarter while the natural gas production index declined from 4.8 to -4.5.
• The uncertainty index remained elevated as it rose 4 points to reach 47.1.
• Lease operating expenses continued rising this quarter but at a slightly slower pace than last. The index was 38.7 vs. 28.1 last quarter. The finding and development costs index was 11.4 vs. 17.1 last quarter, suggesting modest growth in those costs.
• Support service firms reported mounting cost pressures this quarter with the input costs index rising 9.1 points to hit 40.

$50 Oil Would Lead to Notable Oil Production Declines for Many Firms

“While most executives expect only a modest impact on production if oil prices were to remain at $60 over the next year, almost half of respondents believe their production would decline significantly if prices were to be $50 per barrel,” Plante said.

Additional takeaways from the special questions:

• Most firms expect that challenges related to produced water management will constrain drilling and completion activity in the Permian Basin sometime over the next five years. Forty-two percent expect these challenges to be a slight constraint on activity while 32 percent expect significant constraints. Only 26 percent expect no constraints from produced water management challenges.
• Almost half of E&P firms report they expect to drill fewer wells in 2025 than they initially planned at the start of the year. 26 percent report they have significantly decreased their expectations while another 21 percent report a slight decrease. A little over one-third of firms, 34 percent, have not changed their expectations while 19 percent have increased their expectations.
• Three-fourths of executives report that tariffs have increased their firm’s cost of drilling and completing a new well, although there was a wide range of responses as to how much. The most selected response–chosen by 26 percent of respondents–was that tariffs have increased the cost by 4.01 to 6 percent. 
• Forty-six percent of E&P firms report that the recent increase in steel tariffs from 25 percent to 50 percent will not affect the number of wells they expect to drill over the second half of 2025. About one-third expect to drill fewer wells, with 5 percent reporting significantly fewer wells and 27 percent expecting slightly fewer wells. Another 22 percent reported it was too soon to know.
• A majority of oil and gas support services executives—58 percent—expect that the selling price for their firm’s primary service or product would decline significantly if the price of WTI crude oil were to be $50 over the next 12 months. Another 23 percent expect their price would decline slightly.
• A majority of oil and gas support services executives—51 percent—expect the recent increase in the steel import tariff from 25 to 50 percent will result in slightly less customer demand over the next 12 months. And 28 percent of executives said it is too soon to tell. Fewer respondents selected “no impact” and “significantly less demand.”

The survey samples oil and gas companies headquartered in the Eleventh Federal Reserve District, which includes Texas, southern New Mexico and northern Louisiana. Many have national and global operations. 

Data were collected June 18–26, 2025, and 136 energy firms responded. Of the respondents, 91 were exploration and production firms, and 45 were oilfield services firms.

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Media contact:
Jon Prior
Federal Reserve Bank of Dallas
Phone: 214-922-6857
Email: jon.prior@dal.frb.org