Energy markets responded to the Russian invasion of Ukraine on Thursday with soaring energy prices — the global benchmark for oil exceeded $100 a barrel for the first time since 2014 — which will bring higher profits for Texas’ oil and gas industry, at least temporarily.
Energy analysts say the conflict could slow the flow of oil and gas from Russia — one of the world’s largest producers — to Europe in the weeks ahead. The price of oil dipped back down to $99 late Thursday after President Joe Biden did not target Russian oil and gas when he announced sanctions against Russia.
Higher oil and gas prices mean more money for Texas producers — and could lead to industry growth in the near term, according to Karr Ingham, an economist with the Texas Alliance of Energy Producers.
While Texas oil and gas producers could see more demand for their products, energy consumers in Texas and worldwide will foot the bill for increased global energy costs, analysts said.
“This is bad for people who, say, have an electricity bill, a gas bill or drive a car,” economist Eric Lewis, an assistant professor at the Bush School of Government and Service at Texas A&M University who focuses on oil and gas, said in an interview.
In the meantime, Texas oil and gas producers can fill some of the void if Russia curtails or halts natural gas exports to Europe.
“This may present a set of circumstances where Texas producers can jump in and fill the gap there,” Ingham said in an interview.
Natural gas is usually shipped overseas in liquid form, and Texas accounts for a vast majority of U.S. liquified natural gas export capacity between Freeport LNG and Cheniere Energy in Corpus Christi, the two primary LNG export terminals in Texas.
Already this winter, households across Europe have experienced high energy costs due in part to low energy reserves and lower-than-normal Russian gas supplies. At the same time, a cold winter has boosted demand for energy.
For now, European utility companies will continue buying gas from Russia — via Ukrainian pipelines — because of contracts already in place, Bloomberg reported. It is unclear if that will continue as Russian military forces sweep into Ukraine.
Biden said Thursday that “this is a dangerous moment for all of Europe” and imposed a series of sanctions against Russia that would cut off the country’s largest banks and companies from Western financial markets, restrict exports of technology to Russia and freeze trillions of dollars in Russian assets.
For the Biden administration, “if you really wanted to go for the jugular, you go after Russian oil,” said Gabriel Collins, a fellow in energy and environmental regulatory affairs at Rice University’s Baker Institute.
But Collins said the high price of oil makes targeting Russian oil through financial restrictions or in joint moves with allied countries a tricky proposition because that would also hurt energy consumers around the world.
“You’d be going after their economic center of gravity,” Collins said, “but also potentially simultaneously going after your own consumers’ wallets’ center of gravity.”
Disclosure: Rice University, the Baker Institute for Public Policy, Texas A&M University and the Texas Alliance of Energy Producers have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
This article originally appeared in The Texas Tribune at https://www.texastribune.org/2022/02/24/texas-energy-russia-ukraine-natural-gas/.
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