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A closer look at potential distortions in state RGDP: the case of the Texas energy sector

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  • Raúl Hernandez
  • Keith R. Phillips
  • Benjamin Scheiner

Abstract

Surprisingly, from 1997 to 2010 Texas RGDP in oil and gas extraction was strongly negatively correlated with oil prices and with factors of production such as employment and the drilling rig count. It also had a slight negative correlation with physical production of oil and gas. In Texas the oil and gas sector is large and volatile enough to have a significant influence on overall RGDP growth so that when oil prices spike up (down) Texas RGDP generally weakens (strengths), which is in contrast to other indicators such as state job growth and real personal income. In this paper we investigate several potential sources of why RGDP in oil and gas extraction has a negative correlation with factors of production and units of output. We then use several different approximations of RGDP in oil and gas extraction to see which seems to be a good substitute for the current estimates produced by the BEA. We find that a measure based on changes in Texas physical production of oil and gas results in an estimate of total state RGDP that is more highly correlated with Texas job growth and closer to the correlation of these measures nationally.

Suggested Citation

  • Raúl Hernandez & Keith R. Phillips & Benjamin Scheiner, 2013. "A closer look at potential distortions in state RGDP: the case of the Texas energy sector," Working Papers 1308, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:1308
    DOI: 10.24149/wp1308
    Note: Published as: Phillips, Keith, Raul Hernandez and Benjamin Scheiner (2014), "A Closer Look at Potential Distortions in State Real Gross Domestic Product: the Case of the Texas Energy Sector," Journal of Economic and Social Measurement 39 (1-2): 105-119.
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