Texas has played a central role in the U.S. energy industry for more than a century.
Due to the shale revolution, proximity to the Gulf of Mexico, and high economic growth, it is likely that Texas will grow in importance in the coming years.
Houston, an energy hub par excellence, is likely to remain a major player in the energy economy of the Western world.
1. Changing oily hearts: What is oil really worth?
Tight oil and tight gas have played an important role over the past 20 years, taking U.S. energy production to new heights. The United States became the leading exporter of crude oil in the world at certain times, reversing the fortunes of oil-producing nations in the Middle East. The Gulf states have historically been the driving force in oil markets, along with Russia as another major energy exporter. Just as the United States became an exporter of hydrocarbons for the second time in its history, the Gulf states have begun to lose their leverage over oil-importing nations. In fact, oil-importing countries were no longer able to determine oil prices to the same extent. We must keep in mind that oil was widely viewed as an inelastic commodity, which means that customers were willing to pay almost any price to buy crude oil. One of the main reasons for this is that until recently, the widespread use of renewables in the energy industry was not that widespread. There were few resources available to replace crude oil.
2. A shale revolution in the United States
This very fact was one of the main reasons why the United States invested heavily in tight oil and tight gas reserves. Even more interesting is that most of these reserves were found in the United States, more specifically in the U.S. Midwest, parts of Pennsylvania and Texas. Let us put this into perspective. Countries like Poland, which had hoped to jump on the shale revolution bandwagon, have found that their own tight oil and tight gas reserves are limited. This may partly explain why countries like Poland have increased LNG supplies from the United States, with its abundant tight oil and tight gas reserves. This allowed countries like Poland to achieve a relative degree of energy independence.
3. The unique situation of the Texas oil industry
Texas is a particularly interesting case because the state has had a well-developed and highly efficient energy industry that existed long before the shale revolution. It was and still remains a key state when it came to oil production in the U.S. and the Western Hemisphere. U.S. energy independence would be far from guaranteed without Texas’ contribution to the energy mix. For example, Texas was able to fully exploit the new shale oil reserves found on its soil as soon as these reserves were found. Technology has advanced greatly since the discovery of the tight oil reserves. New techniques include geological mapping and improved recovery methods for oil exploration.