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released in September by the Federal Reserve Bank of Dallas. This marked the second quarter in a row of contraction. The US oil rig count fell to its lowest point in nearly four years in August, according to data from Baker Hughes.The CEO of Diamondback Energy (FANG), an oil and gas producer based in Midland, Texas, laid out a downtrodden outlook for America's oil industry in a letter to shareholders in August."We continue to believe that, at current oil prices, US shale oil production has likely peaked and activity levels in the Lower 48 will remain depressed," CEO Kaes Van't Hof wrote."The US shale business is broken," one respondent to the third quarter Dallas Fed survey, who works in exploration and production, said. "What was once the world's most dynamic energy engine has been gutted by political hostility and economic ignorance."But now, new economy deals are giving an industry in decline a lifeline.Texas, long the booming center of US energy production, generates more power annually than any other state in the country, and its demand is only climbing.The Electric Reliability Council of Texas, the grid operator that manages about 90% of the state's load, predicted in late 2024 that the power demand load in Texas would climb to 148 gigawatts by 2030. Five months later, in April, the operator updated that estimate to 208 gigawatts.The vast majority of that new demand, nearly 50 gigawatts worth, is expected to come from data centers set to power the AI revolution.All of these data centers are going to need power, and the Permian Basin oil and gas exploration companies' mass of preexisting energy assets — especially natural gas turbines — are well-positioned for a transition to new-economy applications, analysts told Yahoo Finance.Markus Mowatt-Larssen, an energy transition analyst at Welligence, noted that West Texas has an abundance of open land suitable for building both data centers and new power generation assets. Developers can also collocate new data centers at the site of existing upstream assets and "take advantage of stranded natural gas resources for which there is currently not sufficient infrastructure to handle," he told Yahoo Finance.A drone view of Midland, Texas, on June 12, 2025. (Reuters/Eli Hartman) · REUTERS / ReutersProduced water — the water byproduct that comes up from a well along with the extracted hydrocarbons generated by oil and gas assets — can be used for the immense cooling demands of a data center. 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