From the oil rigs outside Midland, Texas, to the corporate boardrooms in Dallas and Houston, industry insiders are increasingly on edge.
Analysts are predicting that domestic oil prices will be below $90 a barrel by the end of the year -- compared with an average of $97 last month -- and will continue to slide into the foreseeable future.
Independent producers like Charles "Cactus" Schroeder III are already selling their future production to protect against such a price drop.
"I've been in the oil business three decades, and I've never done that before," said Schroeder, founder of Chisholm Exploration in Abilene, Texas. "I've been through a few downturns now. Maybe I've finally learned my lesson."
Last week, the U.S. Energy Information Administration released its energy industry outlook and projected that oil prices would hit $88 by November. Driving the analysis is the expectation that global demand cannot keep up with the large quantities of new crude entering the market through the U.S. shale boom and increased production in the Middle East.
Some think the downturn could be far more severe.
Fadel Gheit, senior energy analyst with the investment firm Oppenheimer, said he had recently heard the executive of a "major oil company" -- whom he declined to name -- tell investors privately that crude prices were inflated by close to $20 a barrel.
"Speculation, fear of potential supply disruptions, are driving it," Gheit said. "We are in a bubble, and bubbles always burst. The question is not if, but when and how much."
No one is expecting the price drop to do much to slow the boom in U.S. oil production. Even costly hydraulic fracturing projects would remain profitable with prices as low as $75 a barrel, industry experts maintain.
But a price drop would hurt profits.
Since analysts began putting out their price projections at the beginning of the year, energy stocks are down 2.6 percent overall, according to Bloomberg data.
Jason Stevens, an analyst with research firm Morningstar, thought the decline in energy equities was just part of a larger malaise in the financial markets.
"Everything is kind of flat to down," he said. "Perhaps investors are waking up to the prospect of limited upside. But we've been watching it for about two years."
So far oil companies have been relatively quiet on the subject of falling crude prices.
John Felmy, chief economist with the trade group American Petroleum Institute, argued the predicted price drops were largely based on assumptions that might not come to pass.
Credit Suisse's projection of $82 domestic crude by the end of the 2015, for instance, hinges on political developments that would increase oil exports out of Libya and Iran, an analyst with the firm said.
"Even if they do lift the sanctions, we don't really know the true situation in the Iranian oil industry," Felmy said. "The Iranian oil sector hasn't seen big investment in so long, a big surge in production is unlikely."
For now, the mood in the oil fields around West Texas is largely calm.
Each day, oilmen like Schroeder check political developments in the Middle East as they do the score of last night's basketball game. As for the analysts, skepticism abounds.
"They're as good as anyone else, I guess," Schroeder said of the EIA. "There are a couple big wild cards. Who knows which way it's going to go?"
By JAMES OSBORNE
The Dallas Morning News