Skip to content

High oil and gas prices over an extended time period will bring big bucks to the coffers of the State of Texas

| |

If West Texas Intermediate (WTI) crude stays at $110 per barrel, the state of Texas would see a massive surge in tax revenue, significantly exceeding the official projections released by the Comptroller’s office last year.

Based on current production levels and the state’s tax structure, here is the breakdown of the estimated annual revenue.

1. The Calculation Baseline

To find the annual revenue, we look at three primary factors:

  • Production: As of January 2026, Texas is producing approximately 3.96 million barrels per day (b/d).

  • Price: Your scenario uses $110.00 per barrel.

  • Tax Rate: The Texas severance tax on oil is 4.6% of its market value.

     

The Math:

$$3,955,644 \text{ b/d} \times 365 \text{ days} = 1,443,810,060 \text{ barrels/year}$$
$$1,443,810,060 \text{ barrels} \times \$110 \text{ price} = \$158,819,106,600 \text{ Gross Value}$$
$$\$158.82 \text{ billion} \times 0.046 \text{ tax rate} \approx \mathbf{\$7.31 \text{ billion}}$$

2. Total Industry Tax Impact

While the $7.31 billion covers the direct oil severance tax, the “total” money the state makes is much higher when including natural gas taxes, royalties on state lands, and local property taxes.

  • Natural Gas: Production is currently averaging 33 billion cubic feet per day. Even at moderate prices, the 7.5% gas severance tax typically adds $2.5 billion to $4 billion annually.

  • Total Contributions: In fiscal year 2025 (with lower prices), the industry paid a record $27 billion in combined state/local taxes and royalties. At $110 oil, this total would likely clear $32 billion to $35 billion per year.

     

3. Where the Money Goes

By law, this “extra” revenue doesn’t just sit in the general treasury; it is split between several key funds:

  • The Rainy Day Fund (ESF): Receives 37.5% of oil and gas severance tax revenue above a 1987 baseline. However, since the fund hit its $26.9 billion cap in late 2025, much of this new overflow will remain in the General Revenue Fund for legislative spending.

  • State Highway Fund (SHF): Also receives 37.5% of the excess revenue to fund road construction and maintenance across the state.

  • Permanent School Fund (PSF): Receives royalties from oil produced on state-owned lands to support K-12 education.

Summary Table: $110 Oil Scenario

Revenue Source Estimated Annual Amount
Oil Severance Tax (Direct) ~$7.3 Billion
Natural Gas Severance Tax ~$3.5 Billion
Royalties & Local Property Taxes ~$22.0+ Billion
Total Estimated Impact $33.0 – $35.0 Billion

Note: These figures assume production stays flat at ~4 million b/d. In reality, sustained $110 oil usually triggers a “rig count” surge, which could push Texas production toward 5 million b/d over 12–18 months, further increasing these tax totals.

Gemini

Posted in News

Leave a Comment