Addressing Texas oil and gas leaders at a committee hearing Tuesday, State Representative Eddie Morales Jr. raised one of his final questions for the panel.
"Are we entering a cycle of prolonged volatility?" Morales, a West Texas Democrat, asked.
The House Committee on Energy Resources had spent nearly two hours hearing from the state's energy leaders and analysts, assessing the impacts of the war in Iran on the industry.
"I want to understand your honest assessment and that way we can understand what the legislature needs to do," Morales, who serves as vice chair of the committee, continued. "And how should Texas be thinking about that from an economic standpoint?"
Representatives from the the Texas Oil and Gas Association, the Permian Basin Petroleum Association and Freeport LNG all agreed: it's a difficult question to answer.
Amidst the backdrop of that uncertainty, many of the state's oil companies are hesitant to ramp up production, unsure of whether prices will remain high enough to turn a profit.
"I think as long as this uncertainty persists, you’re going to continue to see the Permian Basin operators and Texas operators do what they need to do to keep this country running and keep replacing the barrels that have been lost," Ben Shepperd, president of the Permian Basin Petroleum Association said during the hearing. "But I think as far as increasing any production dramatically, very quickly, I think that’s going to be difficult to see."
Jesse Thompson, a senior business economist at the Federal Reserve Bank of Dallas, said it takes time to increase oil production – and supply disruptions, caused by war and other geopolitical factors, are often resolved before then.
"If markets become more confident that global supply will remain significantly impacted for an extended period of time, then a stronger U.S. supply response becomes more probable," he said.
However, Thompson said other parts of the oil and gas industry could see increased production.
It could take months to complete repairs to refineries in the Middle East that have been damaged during the war, he said, and refineries along the Gulf Coast are well-positioned to fill this gap.
"Refined product exports are expected to rise – particularly distillates like jet fuel and hydrocarbon gas liquids, principally propane and butane," he said.
Thompson said U.S. petrochemical companies are also increasing production due to the war.
"The timeline for recovery of Middle East chemical output is highly uncertain, but anecdotal information to date indicates that repairs and restarts in many cases or in some cases could take over a year," he said.
Houston saw a slight increase in hiring from December to February, Thompson said, but the city has yet to see an increase in employment driven by higher oil prices.
"It’s not signaling a boom time," he said. "It’s signaling a modest acceleration from the relatively anemic pace of growth that we had at the beginning, at the end of last year."
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