New data on Wednesday from the Dallas Fed Energy Survey,  which polled oil and gas executives at 139 firms across Texas, northern Louisiana and southern New Mexico in mid-September, shows oil and gas activity slipped again in the third quarter of 2025, weighed down by soaring costs, policy uncertainty, and the chaos of new tariffs.

The survey’s broadest measure of business conditions, the business activity index, came in at –6.5, marking the second consecutive quarter of contraction.

The outlook was even gloomier. The company outlook index plunged to –17.6 from –6.4, while more than 44% of firms said uncertainty remains elevated. Production of both oil and natural gas ticked lower, while costs for everything from drilling to equipment leasing surged.

‘The noise and chaos is deafening‘

Executives were blunt in the anonymous comments that come out with the survey each quarter.

“The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch,” one wrote. “Those who can are running for the exits.”

Another added that “the administration’s tariffs, particularly on steel and aluminum at fifty percent, are increasing our cost of business.”

For exploration and production firms, finding and development costs doubled this quarter, while lease operating expenses also jumped sharply.

Oilfield services firms reported their margins are still deeply negative, with one describing the sector as “bleeding.”

The tariffs are cutting deep: operators said higher costs for tubular steel, heavy material, and imported components are making wells uneconomic.

“Tariffs continue to increase the cost of production. We are suffering from a combination of increased cost due to tariffs and downward pricing pressure from end users,” one services executive said.

A grim investment climate

That mix of weak prices and high costs has throttled capital spending. The survey found capital expenditures are falling sharply, with the index dropping to –11.6 from –3.0.

One operator emphasized that the uncertainty from regulatory policy was putting a damper on the spending.

“Day-to-day changes to energy policy is no way for us to win as a country,” the operator said. “Investors avoid investing in energy because of the volatility … and the ‘stroke of pen’ risk that the federal government wields.”

The gloom is reflected in price expectations. Respondents now see West Texas Intermediate crude ending 2025 at just $63 a barrel,  barely above where it traded during the survey period. Two years out, the consensus rises modestly to $69, and to $77 five years from now, levels many independents say are too low to justify new drilling.

The shale dream frays

A decade ago, U.S. shale was hailed as the world’s most dynamic energy engine. Now, industry insiders describe it as broken, even as Trump removes tax credits for renewables.

“The collapse of capital availability has fueled consolidation by the majors, pushing out independents and entrepreneurs who once defined the shale revolution,” one respondent said. “In their place, a handful of giants now dominate but at the cost of enormous job loss and the destruction of the innovative, risk-taking culture that made the U.S. shale industry great.”

Others warned that the sector is being whipsawed by politics from both parties.

“The sword being wielded against the renewables industry right now will likely boomerang back in 3.5 years against traditional energy,” one said, pointing to methane penalties and permitting fights that could return with a vengeance.

While Trump insists domestic drilling will fuel an American energy renaissance, the very policies his administration is pushing are raising costs, curbing investment, and leaving many operators sitting on their hands.

“The oil industry is once again going to lose valuable employees,” one executive lamented. “Drilling is going to disappear.”