Oil prices have been rising over the past few days, but even still Texas oil and gas firms are feeling pessimistic about the upcoming year. In the latest Dallas Fed survey, energy firms reported lower production, increased costs and heightened uncertainty. So what does this mean for this key sector of the Texas and U.S. economies?

Typically, Kunal Patel with the Dallas Fed said oil and gas executives tend to look at the bright side.

“And right now they’re pessimistic,” he said.

Some of their top concerns: “commodity prices, uncertainty, geopolitics.”

Relatively weak oil prices is the big issue — with OPEC+ raising production in an already amply-supplied market. And tariffs aren’t helping, said Karr Ingham, with the Texas Alliance of Energy Producers.

“There's just no denying that tariffs raise costs to the oil and gas industry. And there's no denying that that's happening in a year in which the price of the commodity that they sell is lower than it was last year,” said Ingham.

The cost cutting has already begun for oil and gas firms, and will likely continue, said Dan Pickering, with Pickering Energy Partners.  

“We've seen layoffs. We'll probably see some more,” said Pickering. “I would say lower activity, ongoing consolidation, because the companies are looking for ways to gain efficiency, ways to gain size and scale.” 

But he’s not betting against the state’s oil producers either. The Permian Basin currently produces more oil than most countries.

“Net, net, net, Texas is blessed and will continue to be,” he said.