Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United States
◾◾◾ ▶ Sector opportunities
Manufacturing industry GDP in Texas is $192 billion or 10% of all U.S. manufacturing. The concentration of industries within Texas manufacturing is shown in Table 9 below. The first column in the table indicates that petroleum and coal products comprise 26% of all manufacturing in Texas. Along with chemicals at 20%, these top two industries are responsible for nearly half of the manufacturing output of Texas. There are significant contributions from computer and elec- tronic products and machinery as well. The second column indicates that of all the petroleum and coal product manufacturing in the U.S., 26% of it is per- formed in Texas. Texas also produces 15% of all U.S. chemical products. Once again, there are significant contributions from computer and electronic pro- ducts and machinery.
▶ Petroleum H. Texas ‘ ID card
% of Texas % of total US manufacturing in Texas
Manufacturing
Petroleum and coal products Chemicals
Computers and electronic products Machinery
Fabricated metal products
Food, beverage and tabacco products Other transportationequipment Plastics and rubber products
Source: BEA
100% 26% 20% 14% 10% 6% 6% 3% 3%
10% 26% 15% 9%
12% 9% 5% 3% 7%
The Texas economy has long been dominated by the energy sector. Texas is the number one producer of crude oil, natural gas and total energy in the U.S., with a 15.3% share of total U.S. energy production. It has 24% of U.S. crude reserves, 31% of its production, and is the number one consumer. Texas also has 29% of U.S. dry natural gas reserves, 30% of its production and is the number one consumer. In 2011, its 26 refineries accounted for 27% of all U.S. refining capacity. The refinery business is likely to see steady growth going forward as demand from the chemical industry will be ramped up by cheap natu- ral gas. Several of the largest oil companies in the world are headquartered in Texas, including Exxon- Mobil and ConocoPhillips. It has nine major sea ports for exporting and importing petroleum products. West Texas Intermediate (WTI) remains the bench- mark grade for crude oil in the U.S. and its price is cur- rently between $15 and $20 per barrel less than the global benchmark, Brent crude, because the U.S. cur- rently has a glut of WTI. High production combined with limited pipeline capacity to transport to refine- ries has contributed to the excess. While Texas is the number one producer of crude oil in the U.S., out- put has fallen to less than one third of its peak in 1972. Although there is no doubt that crude production will remain a robust industry for decades to come, growth prospects may be limited. By contrast, natu- ral gas production is on the rebound. Huge new reserves of shale gas have become recoverable because of developments in fracking and horizontal drilling. Much of the natural gas production goes directly to electricity production, which will likely be a growth industry for the foreseeable future. Texas is the number one producer and consumer of elec- tricity in the U.S. Another significant source of demand is from chemical manufacturers who use natural gas as a feedstock. The adoption of natural gas as a fuel for vehicles also offers great promise in the long run. Texas also leads the country in coal consumption with the majority of its supplies coming from Wyoming. Coal mining and consumption is likely to be a weaker industry in the long run because of its emissions and because of competition from cheap natural gas. One bright spot in the coal industry is increasing demand from China, which is the world’s largest consumer and importer of coal. Despite being an economy being heavily dependent on fossil fuels, Texas is also the nationwide leader in wind power. There are over 2,000 turbines in west Texas alone, and the largest wind energy facility in the world is located in central Texas. While crude oil pro-