On November 30, the Organization of Petroleum Exporting Countries (OPEC) reached a credible deal to lower production by 1.2 million barrels/day. Subsequently, the international price of oil rose from a November low of $45/barrel to a high of $52/barrel. Economists expect to still see gas prices below $2.00/gallon as the fundamental drivers of the global supply glut continue.
EIA and other have noted that a small increase in the price oil can make it more profitable to drill in many areas of Texas. The number of drilling rigs at work in Texas continued to rise in November with a count of 271 compared to 256 near the end of October, according to the November 23 weekly report from oil services firm Baker Hughes. Nationally, there were 593 rigs at work compared to 557 at the end of October. Likewise, US crude oil inventories have continued to fall and now amount to 457 million barrels, according to the Energy Information Administration. This is an indication that more crude is getting refined and out to market, easing the supply glut.
US crude production is beginning to inch back up, now about 8.74 million barrels/day – although this remains down from 9.4 million barrels/day from this time last year. Preliminary Texas production figures for September released by the Texas Railroad Commission showed state output was 2.38 million barrels a day, a slight decrease from August production and still trailing last year’s levels.
Relatively low oil price and lack of a robust drilling rebound continues to impact revenue projections in Texas. According to economists convened by Texas Comptroller Glenn Hegar, the overall decline in drilling activity will not cause a recession but will leave Texas lawmakers with less money to fund public services when the next biennial budget is drafted. This will mean Legislators will need to make tough decisions in deciding how to fund critical priorities such as school finance, Child Protective Services, and transportation.
In a new milestone, ERCOT announced that wind energy provided more than 15,000 megawatts of energy for Texas on Monday, November 29. On Sunday, record winds provided 45% of electricity throughout the day. Wind power made up an annual average of 11.7% of electricity in 2015 in Texas, a figure that will approach 15% this year, according to ERCOT. Continued investment in wind and solar in Texas, especially in Senate District 19, will continue to help Texas transition to a renewable, low-carbon future in coming decades.