TNG’s Biggest Takeaways for Energy in 2022
Wed, December 21, 2022
From geopolitical tensions in Europe that led to an energy crisis to record oil and gas production levels in Texas, 2022 was a year that redefined the future of U.S. and global energy. This year, the number of external pressures resulting in price volatility and supply chain issues demonstrated the increasing importance of energy security and independence in the United States.
Natural gas continued to play a significant role in the U.S. energy, mix, while Texas was a key player in the country’s LNG production.
Here are the Texans for Natural Gas top 2022 energy takeaways:
1. The world woke up to the importance of energy security: Russia’s invasion of Ukraine exposed Europe’s overreliance on Russian gas. In the months since that invasion, European nations have found themselves scrambling for energy solutions. In response, U.S. LNG exports to Europe increased throughout 2022, and Texas became the main energy provider to help our trade partners and allies abroad. In the first half of 2022 alone, about 74 percent of all U.S. exports went to Europe, and ports along Texas’ coast provided the essential infrastructure to meet the increasing European demand. In fact, an estimated 90.1 million tons of LNG moved through the Port of Corpus Christi earlier this year. As our global allies called for aid, the United States – thanks to Texas oil and gas producers – answered the call.
2. The United States urgently needs to increase refinery capacity: Refineries took a big hit during the pandemic, with many going offline or shutting down due to decreasing demand. As the economy recovered, not all refineries have been able to come back online in the months since. The number of U.S. refineries fully operating this year was lower than at the beginning of 2020, while the remaining refineries have been operating at nearly max capacity this year. As a result, overall U.S. refining capacity decreased this year compared to 2020 levels. U.S. capacity was 9 million barrels per day in 2022 compared to 19 million barrels per day in early 2020. From production to consumption, refineries are an essential part of the oil and gas supply chain. To continue meeting increasing demand and output levels, the United States needs to invest in reopening refineries to boost its refining capacity.
3. Texas continued to break energy production records:2022 was a year of record output in the Permian Basin, producing an estimated 5 million barrels of oil per day in December. Despite the number of market-based challenges the oil and gas industry has faced in recent years, Texas producers demonstrated their resilience and ability to move past external shocks, including labor shortages, capital constraints, supply chain issues, inflationary pressures, and a difficult regulatory environment.
4. The United States needs more pipelines: From the northeast to the Permian, the United States needs more pipeline infrastructure to transport natural gas output across the country and keep up with increasing demand. In recent years, efforts have been made to increase pipeline infrastructure, particularly in the Permian Basin. But additional infrastructure is still needed to prevent bottlenecks in the coming months with the rising demand for natural gas worldwide. For parts of the United States, like the Northeast region lacking underground fossil fuel resources, pipelines play an even more crucial role. Energy security is currently at risk in places like New England as a result of inadequate pipeline infrastructure to transport natural gas from provider to end consumer.
5. Strategic Petroleum Reserve (SPR) releases are not the long-term solution: In an attempt to combat soaring gasoline prices across the country, the Biden administration released more than 100 million barrels from the SPR in October of this year. As a consequence, the SPR, which is meant to be used during times of severe events and emergencies, fell to its lowest level since the 1980s. Though releasing the reserves might push prices down in the short-term, it leaves the United States vulnerable to real threats and emergencies. It is a temporary band-aid and by no means does it address the root cause of the supply and demand problem. Instead, increasing domestic production and increasing infrastructure and refining capacity are long-term, lasting solutions to lower gasoline prices.
6. The U.S. Gulf Coast revamped oil and gas jobs, with Texas oil and gas employment significantly increasing compared to previous years: Both Texas and Louisiana lost a considerable number of oil and gas jobs during the pandemic (35 percent and 26 percent, respectively). By Q3 of this year, both Texas and Louisiana regained about 44,700 and 2,500 oil and gas jobs, respectively. In June, Texas added more employment in the oil and gas industry than any other state, according to state historical records. The upstream oil and natural gas industry in Texas alone added more than 6,100 jobs between May and June, the largest monthly rise in Texas history. Predictions estimate that this trend will likely continue in 2023.
7. Cohesive U.S. energy policy is necessary for today’s complex global landscape: Increasing global and external pressures and soaring inflation call for a smarter U.S. energy policy. Instead of leveraging domestic solutions at hand, policymakers have focused on geopolitical negotiations, which largely failed, and short-sighted domestic energy policy. The solution to meeting increasing demand and prices is at home. The United States is well-positioned to avoid being at the mercy of external shocks by increasing domestic production. Similarly, U.S. energy policy should not be seen as a binary choice between fossil fuels and renewable energy sources. In comparison to other fossil fuels, natural gas is a cleaner alternative and plays a key role in supplementing renewable energy generation. Without a dependable baseload energy generation with natural gas, many of the current renewable alternatives would be unable to deliver heat or electricity. Revamping refining capacity, promoting infrastructure development and managing rising regulatory compliance costs are all needed to achieve U.S. energy security.
There’s no question 2022 had its challenges. From geopolitical upheaval to inflation, energy security became an important part of the national dialogue, and more Americans realize we need to use the resources we have, particularly here in Texas. Because of that realization, there is hope that 2023 will be a year of renewed investment in our nation’s natural gas production and infrastructure so the industry can continue to rise and meet the challenges that lie ahead.