How Texas Will Lead America’s Energy Future

A stunning shift is occurring in the world energy markets – a development few would have anticipated just a few years ago.   According to a report just released by the International Energy Agency, the U.S. is not only on a path to energy independence but is projected to become the world’s largest oil producer by 2020.  This will vault the U.S. past Saudi Arabia and Russia; currently the two largest oil producers.  Texas will play an outsized role in this global shift in the energy market.  

Despite the predictions of peak oil proponents, US oil production has turned around and is actually increasing.  This is due in large part to new drilling techniques that allow for the economical extraction of oil reserves previously thought to be too expensive to reach.   These shale oil drilling techniques are similar to the hydraulic fracturing technology that has already revolutionized the natural gas industry.

Nowhere is this leap in technology being more profoundly felt than in the Eagle Ford Shale region in Texas.  Eagle Ford runs from the Texas/Mexico border to East Texas.  This area is experiencing an economic boom as a result of the resurgent oil sector.   

A few years ago production in the region was basically zero.  Today it is approaching 300,000 barrels per day.  According to a recent report by the Federal Reserve Bank of Dallas, the Eagle Ford Shale play is “perhaps the largest discovery of new oil reserves in the United States since Prudhoe Bay, Alaska, in 1968.”

Finding a giant oil reserve is one thing.  But what makes this such a powerful discovery is the fact that it is located in Texas where an infrastructure already exists to exploit this perfect combination of geology and new technology.  Texas also has the manpower and expertise, not to mention it’s proximity to the Gulf of Mexico and the oil refineries of the Gulf Coast.

In Texas, the boom isn’t just confined to Eagle Ford.  In West Texas, a region already rich in wind energy resources, the availability of shale oil deposits adds to the regions already substantial energy output.  The Permian Basin alone accounts for about 14% of the nation’s oil production.  The region’s growth is happening so fast there are not enough workers to fill the jobs and not enough housing to house the workers.  In some areas 400 square foot cabins are renting for $1,500 a month; an amount that would get one a 3 bedroom brick home in the suburbs of Houston or Dallas.

The boom in oil is mirrored by a boom in natural gas thanks to the same drilling technology.  Texas is also the nation’s largest producer of natural gas.   Because natural gas is suddenly so abundant and cheap, it has become the main fuel for the Texas electricity grid.  Texas has seen a substantial drop in electricity rates as well over the past several years because of the drop in natural gas prices.   This has lowered the cost of doing business in Texas while at the same time the surge in energy production has increased the state’s tax revenue.

This combination of factors should serve as a template to demonstrate the positively compounding effects that can be seen on the national level as a result of increased domestic production of energy.  The growth of domestic production of energy, in particular oil, will create more jobs, generate more tax revenue, prevent the flow of US capital to OPEC nations, and enhance national security.  It will also lessen the political leverage currently enjoyed by some of the US’s quasi-allies.

The once pie-in-the-sky hope of US energy independence is now very much a real possibility.  When energy ceases to become a drag on the US economy and rather becomes a tail wind, a new era if American property will unfold.  Texas will lead the way.

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