Petroleum and Chemicals
Texas is a national leader in petroleum extraction, refining, and chemical products production. The state is also a global leader in the closely related petrochemical industry. The oil-rich Permian Basin in west Texas, the nation’s largest oil field, has been a juggernaut for daily oil production. In colder oil- and gas-producing regions, well heads and pipelines are buried and insulated from frigid temperatures.
Unfortunately, well heads and pipelines in Texas are placed at ground level, where they have frozen. As a result, oil production from the Texas side of the Basin alone fell by as much as 80%, to between 600,000 and 700,000 barrels a day. Nationwide, the country’s daily oil production fell by 40%, to just four million barrels a day. Refinery capacity will also take a major hit in Texas. Production at five major oil refineries was shuttered or throttled back due to the storm.
As a result of these impacts to petroleum extraction, transportation, and refinement, analysts anticipate rising market prices due to temporary shortages of raw materials. This is on top of an already 13-month high for oil prices.
Like everything else in Texas, its agricultural industry is massive. As of December 2020, Texas had the nation’s largest number of cattle in their feedlots. It had the fifth largest dairy herd, and was the nation’s sixth-largest chicken producer. All of these are now at risk.
The storms and frigid temps have had multiple, severe impacts on the local agricultural industry – from farm to table. Temperatures dropped to lethal levels, putting livestock in immediate risk of exposure.
Water and gas pipes across the agricultural value chain have frozen. Dairy farmers have had to dump upwards of $8 million of milk a day. Their dairy processors have been unable to power or heat their facilities. Feedstock supplies are running low, and deliveries are uneven due to the conditions. Meat and dairy products are not making their way to distributors.
In many cases, bare shelves in grocery stores are reminiscent of the frantic early days of the COVID-19 pandemic. Indeed, food insecurity is such a concern now in Texas that the Agriculture Commissioner, Sid Miller, issued a “red alert.” He requests that Governor Greg Abbott declare agricultural businesses as part of the state’s critical infrastructure.
This would enable farms and processing plants to receive emergency gas and electricity supplies. Otherwise, the impact to the food supply chain could be greater than anything we’ve seen since before the pandemic.