Article by Carlos Navarro Published in Nueva Libertad
May 11, 2020
Summary: An article by Senior Research Associate Carlos I. Navarro was recently published in a special edition of the publication Nueva Libertad
on the effects of the shelter-in-place orders that Texas enacted in response to the coronavirus epidemic, along with the recent drop in oil prices.
Although the lockdown has had the intended effect of lower active cases of Covid-19, the Texas economy has suffered a double blow – in sales taxes and oil production.
“Even with a hindered job market, Texas has historically shown better growth and opportunity after a recession when compared to other states. The extra problem Texas is encountering today is the historic decline in the price of oil. The lower oil price and the negative economic effects of the "lockdown" will seriously affect the income of workers and firms in all industries, and the revenues of the state government,” said Navarro.
Estimates show that the state budget could decrease up to 15% relative to 2019. With such a sharp decline in tax revenue and the oil market, Texas has a limited number of options.
Navarro stated, “There are two possible scenarios, one where the Texas Railroad Commission dictates a cut in production for this summer, or one where the low price in a virtually free market makes less efficient producers, that is, those that produce oil at a higher cost, fail and exit the market.”
Click here to view a translation of the article.
View the original article at Nueva Libertad