Reliable and affordable energy is a cornerstone of modern life. We use energy, mostly in the form of gasoline derived from crude oil, to power the vehicles that ferry us to work and play. Electricity from coal, natural gas, nuclear or wind power provides us with light, powered appliances, heating and cooling. And some sources of energy are used as chemical feedstocks to make other products, an industry in which Texas is a world leader. Our standard of living, then, depends upon readily available sources of energy.

Energy use historically has been tied to population and economic growth. Texas’ population is expected to continue to increase for decades to come, and our economic growth will depend on the availability of energy.

For much of the twentieth century, Texas’ economy was tied to the oil and gas industry, which accounted for more than one-quarter of the gross state product at the height of the oil boom in the early 1980s. Tax revenues from energy production and use, particularly oil and gas, have long contributed a significant share of state revenues; at their peak in the early 1980s, tax revenues from oil and gas alone accounted for more than a quarter of all state revenue. Though the state’s economy has diversified over the last 25 years, and the share of our economy accounted for by oil and gas has declined, the industry has seen a recent resurgence due to rising oil and gas prices and remains a major component of the Texas economy and contributor to the state’s fiscal coffers.

Overview

The energy industry plays a critical role in the Texas economy. The strength of the state’s economy depends upon reliable and affordable energy supplies. As the state’s population increases and its economy grows and evolves, it is vitally important to continue meeting this demand.

Texas has a great assortment of energy options available to power its future.

In basic terms, energy is used to perform work. Initially, this work was performed through our own labors, then by domesticated animals and now, increasingly, by machines. For any person, animal or machine, work requires an energy source or fuel. Bread consumed by laborers allowed them to move stones that became the great pyramids; grass eaten by oxen drove wagon trains across the West; and diesel fuel enables modern trucks to haul freight nationwide.

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Today, Texans use energy for cooling and heating their homes and powering appliances; in industrial applications, such as petroleum refining and chemical production; and for a variety of commercial applications, from preparing crops for market to manufacturing goods. Energy also is consumed in the form of transportation fuel, both for personal transport and to move goods and provide services to consumers. And about 30 percent of all energy consumed in the state is used to generate electricity.

Reliable and affordable energy is an important factor in economic development. In 2007, for example, two large manufacturing companies rejected possible expansion sites near Boise, Idaho because the area could not guarantee the necessary electric power, costing the area as many as 1,000 jobs.

And disruptions to our energy supplies are costly. A massive electrical blackout on August 14, 2003, affected eight states and 50 million people in the northeastern U.S., costing the nation’s economy between $4.5 billion and $12 billion in economic activity. According to the Electric Power Research Institute, Texas loses between $7.3 billion and $11.5 billion annually to power outages, losses second only to California’s.

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