Metropolitan Lens: The Texas economy in an age of cheap oil

REUTERS/Smiley N. Pool - A sheen of oil is seen around a pump jack surrounded by flood waters in High Island, Texas after the passing of Hurricane Ike, September 14, 2008.

The two-year slump in oil prices is taking a massive toll on states that heavily depend on the oil and gas industry. Not only is the slump cutting into drilling and mining activities and eliminating jobs associated with those activities, but it is also leading to decreased tax collections among the producing states, weakening state and local economies. In a recent paper, Brooking Fellow Mark Muro and I identified some of the problems facing U.S. states that rely on revenues from the volatile oil and gas industry. To even out the economic uncertainty caused by the energy sector’s boom-bust cycle, we proposed these states adopt a trust fund solution and ultimately move away from their reliance on carbon economies.

In a podcast segment, I discuss how the continuing drop in oil prices impacts the Texas economy—the leading crude oil producer in the country—and the Houston metropolitan region. Similar effects can be seen in other states that are top energy producers.