Texas Border Business
Climate change is very real and must be dealt with, yet energy demand is soaring. Let’s briefly explore the underlying dynamics.
The sources of energy usage in the United States are changing rapidly. Renewables have now surpassed both coal and nuclear to become the third-largest source. Each of these three components comprises less than 9% of total consumption. About three-fourths of domestic energy is derived from petroleum (about 38%) or natural gas (36%).
Of the almost 94 quadrillion BTUs used in the US in 2023, approximately 37% was for transportation, with another 35% for industrial purposes, 15% for residential needs, and 13% for commercial enterprises.
Petroleum has been the most-consumed fuel in the country since it passed coal 73 years ago. However, it is currently at levels first achieved in the 1950s and remains well below 2005’s peak. Conversely, natural gas reliance has surged, thanks largely to its usage in electric power generation. Renewables are on the rise (though not as quickly as natural gas), nuclear has been basically flat for decades, and coal has fallen rapidly (by half) over the past 20 years.
It should be remembered that petroleum products include not only fuels (gasoline, diesel, jet fuel, and propane), but also industrial chemicals, plastics, paints, adhesives, cleaning products, lubricants, synthetic fibers, and some pharmaceuticals (to name but a few). These essential items are used across the economy and by industries and households alike.
Natural gas is also crucial to our quality of life. Since overtaking coal in usage in the 1950s, supplies have increased in response to advances in drilling technologies and the identification of substantial additional resources. Consumption reached a record level in 2023, largely because of increased demand for electricity. It is also used extensively in fertilizer production, helping to increase crop yields and feed the world.
Even as renewable sources such as wind and solar substantially increase capacity, meeting electric power needs will require natural gas-fired generation for the foreseeable future. In Texas, for example, the Electric Reliability Council of Texas (ERCOT) recorded an all-time high for winter natural gas-fired generation one cold night in January, and the summer record was established last year. With dramatic increases in power needs due to AI, crypto mining, and electrification (ERCOT is expecting a 65% increase in peak demand by 2030), the challenge will only escalate. National and global consumption are similarly trending upward.
The sources of energy have shifted remarkably over the past 20 years, even as climate concerns have reached a critical state and demand has exploded. The future will, of necessity, be characterized by an “all-of-the-above” strategy in which diverse forms of energy must be produced and consumed in an increasingly responsible manner, Stay safe!
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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.