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Well known for its oil and gas production, Kermit was originally founded by ranchers needing a supply hub in an isolated area of West Texas. An 1876 campaign by Col. Ranald S. Mackenzie helped rid the area of Comanche Indians, and prompted by the state's policy for free use of its land, ranchers quickly moved in. This population growth resulted in the establishment of Winkler County in 1887. Competition between nearby towns for the title of county seat lasted until 1910, when Kermit's offer of free lots won it the designation. Though the town later experienced a drought, which severely crippled the population, the discovery of oil on ranchland owned by Thomas G. and Ada Hendrick in 1926 helped the town boom. Today Kermit's economy is sustained by ranching and oil and gas production.
