In 2014, the State of Texas received $5.8 billion in oil and gas production taxes, more tax revenue from oil and gas production than any year since 1978. And, yet, this represented no more than 5.5 percent of the total state tax revenue in 2014, a far cry from the 25.6 percent of the budget these revenues represented back in the early 1980s. The economy of Texas has diversified since the 1980s, attracting investment from major companies in computing, engineering, transportation, and other industries, and has a more diverse tax and non-tax revenue base as a result. Even so, today's policymakers are facing a lower contribution to tax revenue from the oil and industry than any Texas policymaker has witnessed since the late 1980s. The state earns tax revenue based on the value of the oil and gas produces, so as prices plummet - as they did starting in July 2014 - so do the corresponding tax revenues unless producers increase production sufficiently to offset the decreased price per barrel of oil or million cubic feet of natural gas.
State legislators and mayors alike are also witnessing swings in local investment and revenue on business taxes as companies focus more constrained development budgets and company valuations are revised along with the value of their assets. Global oil and gas service industry leaders - including Schlumberger, Halliburton, Flour and others - recorded steep revenue losses in 2015 with little promise of a strong enough recovery in commodity prices in 2016 for balance sheets to recover. Baker Hughes and Halliburton struck out early in the 2014 price decline to merge and best manage resources during the industry downturn, however, in the 1.5 years since the $35 billion merger was announced, the deal has yet to close.
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Source: BP Statistical Review of World Energy
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