May 5, 2012
On Texas, Energy, and OpportunityBy Jason Thomas
Today we sit at a crossroads in both the economic future of the United States and the energy model that will fuel the world over the next century. Texas is positioned to be one of the biggest winners in what promises to be a disruptive shift in the world's energy production and economic leadership. Texas sits at the intersection of a past where energy was ostensibly cheap but expensive in ways few would acknowledge and a future where energy is no longer taken for granted.
The price of a century of cheap oil
The global energy mix of the past few decades has been based largely on fossil fuels, particularly oil sourced from some of the most hostile regions of the planet. The negative implications of this have been numerous.
Energy is vital to modern economies. The remarkable ascendance of the U.S. in the decades since World War II would not have been possible without cheap, uninterrupted access to energy, and oil in particular. Because of this, the U.S. has been forced into numerous uncomfortable situations politically and economically. It has been forced to embrace foreign despots whose policies and tactics run counter to American ideals. Painful compromises have been made in order to maintain the political stability necessary to keep the oil that powers American prosperity flowing.
Worse, the steady flow of capital out of America into these oil-producing regions has shifted a large portion of American treasure into the hands of people who despise the American ideology of freedom, tolerance, and opportunity. They use American money, the fruits of American labor, to attack these very ideals.
Aside from the political, ideological, and economic price that has been paid, there has been a very real environmental impact. It's no secret that fossil fuels are dirty, that they burn dirty, and that they pollute.
Fossil Fuel 2.0 and the Future of Energy
When an optimist looks towards the future, he sees a different paradigm. Renewable energy is the future of energy because it must be. The energy model of the past is unsustainable environmentally, economically, politically, and morally. Texas is positioned to be a leader and one of the largest beneficiaries of this shift. The transition from fossil fuels to renewable sources will be gradual and will take longer than most people want to believe.
Even the most ardent optimist can't see fossil fuels going away overnight or any time in the near future. But there are some important trends that will help to reduce some of the negative impact of America's use of fossil fuels. This will buy time while renewable energy technology and deployment continue to gain ground.
The Importance of Natural Gas
The production and usage of natural gas have increased steadily over the past several years even as prices for natural gas have declined dramatically. Texas has substantial natural gas reserves, and a large portion of Texas electricity is produced from natural gas-burning power plants. Natural gas burns cleaner than coal. While we would all prefer that 100% of our energy come from low-pollution sources like solar and wind, the truth is every bit of energy produced by clean-burning natural gas in place of oil or coal is a win for the environment and a win for American energy-independence.
Energy comes in many forms and is produced in many ways, but largely, it is converted into two usable forms;: the electricity that powers our lights, appliances, offices, and manufacturing process and gasoline which powers our cars, trucks, tractors, and machinery. Gasoline comes from oil, which, as discussed before, often comes from people who don't much like us.
The OPEC cartel controls a substantial portion of global oil supply, which gives them the ability to steer oil prices to their benefit. This, in turn, affects the price Americans pay for gas. It has been said that gas prices act in the same way as a tax on American consumers. When prices go up, Americans have less money to spend elsewhere, and the economy suffers. The "tax" is ultimately set by the OPEC oil cartel. (Ever heard of "taxation without representation"?)
The Electric Vehicle, Natural Gas, and Texas Oil
Two shifts are happening that will begin to lesson OPEC's control over U.S. consumers. One could ultimately reduce America's demand for oil and another could shift the source of the oil Americans consume away from the Middle East to -- you guessed it -- Texas.
After years of being a niche market, the electric vehicle is finally gaining traction with American consumers. The high gas prices of recent years are also a major factor in the electric vehicle becoming a part of the mainstream. Electricity, particularly in Texas, is often produced from natural gas. Oil, which is refined to make gasoline, is being replaced by electricity produced by natural gas (among other sources). Thus, every mile driven in an electric vehicle is cheaper and cleaner, and uses domestically sourced energy. Americans win on all counts, and Texas in particular, as a major domestic source of natural gas, is a clear winner.
Though it is encouraging to see electric vehicle usage spread, the truth is that EVs still make up a small fraction of cars on the road. And that is likely to be the case for years, even decades, to come.
So wouldn't it be great if America could get more of its oil domestically? Well, here again Texas has an answer. It turns out that there is a lot more oil in the ground in Texas than once thought. To be more precise, it's been known to be there for a while. But until recently, certain oil reserves were thought to be impossible or too expensive to retrieve. Innovations in drilling technology have ushered in what some are calling the next Texas oil boom. While many people call Texas the "Saudi Arabia of natural gas," it's worth noting that Texas was the Saudi Arabia of oil before Saudi Arabia. The modern oil rush started in Texas.
Texas and Tomorrow's Energy
The Texas natural gas industry and the resurgent Texas oil industry will become an important bridge between today's fossil fuels and tomorrow's renewable energy sources. But Texas is already playing a key role in developing and deploying renewable energy. Texas is the number-one wind power-producing state by a wide margin. In fact, Texas is near the top in the world in wind power even when compared to other nations.
Although budget concerns recently caused the Texas legislature to miss an opportunity to pass a solar electricity incentives bill, Texas still holds a great deal of promise in the area of solar power. Texas ranks well above any other state in solar potential, with west Texas being particularly well-suited for solar power production. A single acre of West Texas land could replace 800 barrels per year in oil.
In the areas of research and manufacturing, Texas is also well-positioned to be a leader in renewable energy. Despite unemployment rates below the national average, labor costs are lower in Texas than in many other parts of the country. Texas is known to be a business-friendly state with favorable business regulations and low tax rates. Texas is home to over 200 universities, many of which are involved in innovative research on renewable energy.
Energy has long been an important industry for Texas. However, if current trends continue, the coming decades could see the influence and prosperity of the Lone Star State grow substantially. We could see the economic center of the United States gradually shift from the east and west coasts to the middle. Indeed, this shift has already begun.
(Photo Credit: http://www.flickr.com/photos/12567713@N00/1348021933/sizes/m/in/photostream/)
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