Dallas Fed: U.S. Energy Capital Spending to Continue to Decline

Reuters, May 21, 2020

Capital spending by the U.S. energy sector that has dropped during the coronavirus crisis could fall another 30% or more, which would have far-reaching consequences on the overall economy, the Dallas Federal Reserve Bank said on Tuesday.

U.S. fuel demand dropped at one point by nearly 30% due to shutdowns ordered to stop the spread of the coronavirus, contributing to a dramatic fall in oil prices.

When oil prices have been low in the past, consumers had more discretionary income left for other purchases after paying less at the gas pump. But now, people are restricting their movements nationwide, with the consequence that numerous energy companies have ratcheted down spending and shut wells.

The sharp reduction in capital expenditures by oil companies explains why this oil price decline, on balance, actually hurt U.S. investment spending - and hence, economic growth - not only in oil-producing regions, but overall,” the Dallas Fed article said.

A bright spot is that U.S. banks are not overly exposed to the oil sector’s crisis.

Even for the most-exposed banks, the share of bank loans to the energy sector was no larger than 18% in the fourth quarter of 2019,” the article said. Few banks even had an exposure larger than 2%, and tighter regulations mean those banks hold more reserves to guard against losses.

(Reporting By Tim McLaughlin; Editing by Sonya Hepinstall)

Click here to read the full article from Reuters.

Copyright 2024 Thomson Reuters. Click for restrictions.

Comments and Discussion

There are no comments yet.

Add a Comment

Please log in or register to participate in comments and discussions.

Inspectioneering Journal

Explore over 20 years of articles written by our team of subject matter experts.

Company Directory

Find relevant products, services, and technologies.

Training Solutions

Improve your skills in key mechanical integrity subjects.

Case Studies

Learn from the experience of others in the industry.


Inspectioneering's index of mechanical integrity topics – built by you.

Industry News

Stay up-to-date with the latest inspection and asset integrity management news.


Read short articles and insights authored by industry experts.

Expert Interviews

Inspectioneering's archive of interviews with industry subject matter experts.

Event Calendar

Find upcoming conferences, training sessions, online events, and more.


Downloadable eBooks, Asset Intelligence Reports, checklists, white papers, and more.

Videos & Webinars

Watch educational and informative videos directly related to your profession.


Commonly used asset integrity management and inspection acronyms.