The fact that Texas is stuck in a cycle of drought and occasional floods is old news. Yet, there is a distinct relationship between the Texas drought and the oil and gas industry. Because water used in shale exploration comes from local water sources, we want to talk about the impact of drought on Texas oil and other key areas in the south and Midwest that are in a similar situation.
Here’s what the drought means for oil and gas investments.
- Water is essential to the oil and gas industry.
- The Texas drought is putting a strain on the energy sector.
- Despite water shortages, there are still smart investments to be made in the oil and gas industry.
How are Water and Energy Connected?
Water is essential to all energy production. Steam turbines in thermoelectric power plants use water to create steam and for cooling. Hydroelectric power plants funnel water through dams to generate power. Petroleum and natural gas industries use water for hydraulic fracturing. And in turn, energy is used to extract, convey, and deliver water to dry areas.
What Is Going On With The Texas Drought?
The high heat and long-term lack of rainfall in Texas has created drought conditions that make water very, very precious. The lack of rain means that groundwater is drying up, and high temperatures can reduce biofuel feedstocks and increase the risk of wildfires.
This creates an unfortunate situation for the agriculture industry: reservoirs are being drained and crops are being ruined. In some places, water needs to be delivered to towns in tanker trucks because their wells for drinking water are dried up.
The result is that some farmers are selling the water under their land to cities and oil companies to stay afloat. This can spark some conflict between neighbors, landowners, oil companies, and concerned citizens.
How Does the Drought Impact the Oil and Gas Industries
In the short term, drought can cause some pretty big problems for the Texas oil industry, as well as the natural gas industry. Less water can mean less energy production. Sometimes energy facilities might even have to close. This is doubly problematic because hydraulic fracturing, which helped the U.S. become the largest global oil and dry natural gas producer in 2018, has also created a rising water demand.
What to Consider With Your Mineral Investments
When natural disasters and climate conditions create problems within the energy sector, it’s easy to jump to conclusions. But at Eckard Enterprises, we believe in the power of investing in innovation to solve problems and meet the rising water demand.
Innovation like horizontal drilling and hydraulic fracturing helped to make the U.S. less dependant on energy imports. And let’s not forget that farmers have been mining water for irrigation for many years. It’s highly possible that if given the right investment, produced water from fracking could be treated for irrigation. This could help to alleviate some of the water demand and, in turn, allow oil and gas companies to increase their drilling activity.
As with any investments, it’s important to stay informed. Visit our resource center to learn more about the energy sector.