Perryman: Texas’ unique position in energy sector provides fantastic buffer
Wed, April 20, 2022
As gas prices surge, breaking records set during the Great Recession of 2008, American energy independence has dominated the national discourse.
“I think it’s giving people a wake-up call about American energy,” said economist M. Ray Perryman. “I think we need that.”
Speaking at the Port of Brownsville’s State of the Port event, Perryman discussed Texas’s unique position in the energy sector that could spell relief for the nation now and in the near future.
Per the U.S. Energy Information Administration, Texas produces the most crude and natural gas in the country, accounting for 43% of all crude oil and 26% of all natural gas produced in 2020. Texas also produces more electricity than any other state and nearly twice as much as Florida, the second-place holder. The state also leads in renewable energy. With investments like those seen in Starr County, Texas generated about 28% of all wind-power electricity in the U.S. in 2020 and ranked first in renewable energy capacity in 2021. In short, Texas is a powerhouse and a major player in the energy sector.
However, the state’s full energy potential was quashed with the ushering in of the current administration. Executive orders revoking the presidential permit of the TransCanada Keystone Pipeline; ending fossil fuel subsidies; and halting all new oil and natural gas leases on public lands, while launching reviews on all existing leasing and permitting practices, had a chilling effect on energy investment.
“The restrictions effect the ability to raise capital,” said Perryman. “If you tell someone ‘you’re not going to be here in 10 or 15 years,’ then they don’t want to invest billions of dollars in capital to do something.”
In light of the government’s own projections for energy consumption over the next 30 years, Perryman says the regulations themselves are counterintuitive.
“There have been a lot of restrictions in Washington lately on developing pipelines, exporting crude, a lot of things to try to discourage the crude industry,” said Perryman. “This is happening at the same time that the Department of Energy’s own forecast – the very people who are putting these restrictions on – their own forecasts show we have to have more oil and gas in the future. That’s even with dramatic growth in renewables and dramatic growth in many other things.”
While the consumption of oil and natural gas is expected to increase domestically, the same is true globally. The U.S. will need to produce 31% more oil and natural gas in the next 30 years to meet the new demand. But, Perryman says Texas is primed to take the mantle.
“Because of world demand and the needs of the world, we’re going to have to have more oil and gas,” said Perryman. “The lowest carbon oil and gas comes out of Texas. It really makes sense for the infrastructure to be developed, for the resources to be developed, [and] to invest in all the technology that captures the carbon and lets it burn cleaner. It’s absolutely essential that we use these resources effectively in the future, and anything that restricts or limits that is going to be in the long run detrimental, in the long run not be viable in sustainable policy.”
Russia’s invasion of Ukraine has only punctuated this message. The vulnerability in relying on tumultuous leaders to supply vital resources is on full display as heads of state scramble to find alternatives to Russian energy.
“The source of Russia’s economic power is that it controls the natural gas that heats Western Europe and Eastern Europe,” said Perryman. “…If we could supply Europe with the natural gas it needs to get through these winters over there, then basically Russia’s entire base of economic power goes away, and it’s nothing more than another middle-sized country that has a fairly limited role and influence in the world. So, I think that it’s absolutely essential that if we look strategically, not only at our needs, but also geopolitics, that we end up doing much more in the way of developing our natural gas resources and our LNG [liquified natural gas] export capabilities.”
With the instability further raising gas prices, the White House announced the release of one million barrels of oil a day from the national Strategic Petroleum Reserve for the next six months. Though hoping to mitigate consumer pain at the pump, the announcement demonstrates another short-term solution to the long-term problem.
“It may take a little time for the policymakers to come to realize all this, but we’re in a situation right now that I think the geopolitics highlights what was already an economic reality,” said Perryman.
Whether or not the administration will facilitate the production of oil and natural gas in the future, Perryman believes it will be unavoidable.
“One thing I’ve learned in all my years with this stuff is people go off on tangents in both directions sometimes in policy,” said Perryman. “…But, the one thing we say about a market economy is when something has to happen, it will. That’s what it comes down to, and we have no choice in the world but to figure out the best way to do energy, which includes massive renewal investments, but also includes cleaner, more efficient, more effective use of hydrocarbons. And, that’s where we are going to end up, and that’s where we have to end up.”
At the Port of Brownsville, these words are proving true. The anticipated Rio Grande LNG export facility is coming closer to fruition as natural gas supplier NextDecade signed a 20-year contract with China’s Guangdong Energy Group late last month. A final investment decision (FID) for the project is expected by the end of the year.
When asked if he had any advice for the Biden administration in dealing with the energy sector, Perryman suggested they review their own data.
“What I would recommend is that they look at their own numbers and that they recognize that under any scenario they use … the demand for oil and gas goes up in the future,” said Perryman. “We’ve looked at even more dramatic situations with major, massive changes in the renewable energy, and they still show you’re going to have to have more oil and natural gas in the future than you have today. Read your own numbers, look at them, and then support policies that encourage the development of the cleanest aspects of those industries.”
This article originally appeared in the Rio Grande Guardian.