Dallas Fed Looks Back on the Year in Drought, Beef and Black Gold

In '12, a parched Texas saw drought ease, but the cattle industry continues to reel from the hangover brought on by 2011, the driest year in its history. Meanwhile, oil! Dear Lord, he sent us another boom. The Dallas Fed describes what 2012 held for these iconic Lone Star pursuits.

We're a farming state, and though we boast the largest cattle industry in the country, and cotton fields far as the eye can see, last year wasn't particularly kind. It may not have been quite as dusty as 2011, but ranchers got kicked in the teeth when they stocked up on hay and grain for their herds. Hay tripled in price last year. In response, ranchers sold their cattle earlier and cheaper. This comes the year after the state shed 11 percent of its herd for reasons even a city slicker can understand: Grass wouldn't grow.

The 2012 economic portrait wasn't all hardship and loss, though. On the upside: Oil. Shale oil, to be exact. After bottoming out at 391 million barrels in 2007, oil production in Texas was resurgent at 712 million barrels in 2012. Now, here's where I piss in your bowl of hydrocarbons: the benchmark price for that kind of crude is $20 below the international market price. It's like we're watching the shale-gas bonanza all over again. Drill drill drill! Aaand price collapse. Part of the problem is a lack of pipeline capacity to move it around the country. Although the Keystone XL, along with a few other pipelines, may soon do the job.

You might think that with the South Texas Eagle Ford shale's proximity to those big ol' Gulf Coast refineries, they'd just ship it on over and, voila!, Texas gets cheap gas and energy independence. But heavies like Valero only have so much use for the light stuff. They prefer heavy sour crude (like the goop that will be arriving via the aforementioned Keystone pipeline from Canada shortly) which they can turn into diesel for export.

Sure, in 2012 Texas was, as Governor Rick Perry likes to say, "open for business." Especially if your business involved making really, really deep holes in the ground. If you happen to be one of the roughly 2 million Texans who slipped downward out of the middle class, less so.

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