Energy industries ; Petroleum industry and trade ; Petroleum products - Prices ; Gasoline - Prices

Jackson Thies

English

Research Papers in Economics

NoteWorthy
SouthwestEconomy    FEDERAL RESERVE BANK OF DALLAS • NOVEMBER/DECEMBER 2008 14
Texas has been underinvesting in roads and highways 
and spending too small a share of its funds on projects in 
urban areas, according to a recent study by David Luskin, 
Erin Mallard and Isabel Victoria-Jaramillo in the Annals of 
Regional Science.
The authors determine efficient spending levels by us-
ing the Highway Economic Requirements System, a Fed-
eral Highway Administration model based on cost–benefit 
analysis. The model considers three types of benefits: high-
way users’ gains valued according to the average hourly 
wage across all occupations, the highway managing agen-
cy’s cost savings and decreases in vehicle emissions. All are 
given monetary values. 
The  model  finds  Texas’  optimal  investment  would 
have been $38 billion during 2000–04—$25 billion more 
than what the Texas Department of Transportation actually 
spent on roads and highways.
In addition, the model recommends allocating 70 to 
80 percent of all Texas highway funds to urban roads. But 
the state’s metros received only 56 percent of state highway 
funds in 2000–04. 
Some of the funding shortage is attributed to the de-
creasing real value of available funds. Most of Texas’ high-
way funding comes from motor fuel taxes, which haven’t 
risen since the early 1990s. While tax revenues have in-
creased with the population, they haven’t kept up with the 
rising cost of highway construction. 
—Michelle Hahn
TRANSPORTATION: Texas Highway Investment Falls Short 
The global economic slowdown has taken a toll on 
energy prices. West Texas Intermediate recently dropped 
under $41 per barrel, well below the all-time high of $147 
set in early July. Despite the drastic decline, oil prices will 
average $100 per barrel for 2008.
World oil consumption is expected to decrease for the 
first time since 1982, according to the U.S. Energy Informa-
tion Administration (EIA). With demand subdued, oil pric-
es are expected to remain low. The EIA’s recently revised 
forecast calls for an average of $51 per barrel in 2009.
Gasoline prices have tracked oil’s decline. The nation-
al average recently fell below $1.70 a gallon, with the year’s 
average at $3.27. U.S. gasoline consumption has declined 
3.4 percent in 2008. The EIA predicts an average price of 
$2.03 a gallon for 2009. At that price, consumers will save 
$172 billion at the pump, or about $1,500 per household.
While  motorists  rejoice  over  plunging  oil  prices,   
another supply crunch could be down the road. Current   
prices are high enough to maintain production but won’t 
spur capacity expansion. Today’s low prices threaten in-
vestment in unconventional resources like the Canadian 
oil sands. New production capacity will grow more slowly, 
leading to upward pressure on prices when demand re-
bounds.
 —Jackson Thies
ENERGY: Oil, Gasoline Price Spikes Unlikely in 2009 
Texas Instruments announced layoffs after third-quar-
ter sales declined. After months of faltering sales, Dell shut 
its Austin plant in March; its employment fell 9 percent 
year-over-year in the third quarter. 
Computer and peripheral equipment manufacturing is 
suffering more in Texas than the nation. October employ-
ment fell from last year’s levels by 11.5 percent in Texas 
and 0.1 percent in the U.S. 
Texas is faring better than the nation in some sec-
tors.  State  employment  in  semiconductor  manufacturing 
declined 2.1 percent, less than the nation’s 3.8 percent. 
Texas  telecommunications  jobs  were  down  0.9  percent, 
compared with 1.6 percent nationwide.
—Mike Nicholson
QUOTABLE: “Throughout the first half of this year, the energy states have 
managed to avoid the recession that has plagued much of the nation. This 
is beginning to change.”
– Keith R. Phillips, senior research economist 
The recession that began in December 2007 is hitting 
the U.S. high-tech sector. 
Many leading companies cut employment, reported 
declining  third-quarter  sales  and  reduced  fourth-quarter 
revenue projections. The Semiconductor Industry Associa-
tion reports that worldwide sales dropped 2.4 percent in 
the 12 months ending in October. It predicts global sales 
will decline another 5.6 percent in 2009, the first annual 
decrease since the 2001 tech bust.
Texas  high-tech  companies  aren’t  immune.  Dallas-
based  AT&T  has  announced  12,000  job  cuts.  Following 
its acquisition of Plano-based EDS in September, Hewlett-
Packard said it would cut employment 7.5 percent as part 
of a three-year restructuring plan. 
TEXAS HIGH TECH: Feeling the Bite of the U.S. Recession 

Noteworthy: energy: oil, gasoline price spikes unlikely in 2009

http://dallasfed.org/assets/documents/research/swe/2008/swe0806f.pdf

Noteworthy: energy: oil, gasoline price spikes unlikely in 2009

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Research Papers in Economics