Editorial note
Welcome to the third installment of our new series, The Oil Crunch, and the second contribution by political risk and geopolitical analyst, Yagiz Sullu. You can read Sullu’s first peace on crude oil terminal decline below.
In this special US midterm-focused installment, Sullu looks at, Texas, the largest oil-producing US state, the risks and challenges and what its future as an energy player has in store.
By Yagiz Sullu
Texas has long been central to America’s energy security. It is the nation’s largest producer of crude oil and natural gas, and a leading state for renewable and clean energy generation, providing roughly one-fourth of the country’s domestically produced energy, supporting the US economy, and strengthening its energy security.
Texas energy dominance vs US energy security
However, Texas’s energy dominance does not necessarily guarantee the US’s long-term energy security.
Despite its abundant resources and expanding production capacity, the state faces several challenges that could undermine its ability to meet America’s future energy needs.
The health of Texas’s energy infrastructure
Although Texas holds tens of billions of barrels in proved and shale reserves, the Strategic Petroleum Reserve (SPR), partly located in Texas, has faced severe drawdowns. The growing electricity demand requires substantial expansion of Texas’s transmission network, and extreme weather events continue to threaten critical energy operations.
Can Texas continue to serve as the backbone of American energy security, or will its growing vulnerabilities require a fundamental shift of the nation’s energy security strategy?
Abundant energy resources do not necessarily mean reliable and sustainable energy supplies.
Although oil production in Texas is far from entering terminal decline, the SPR’s infrastructure is ageing.
The energy security risks to Texas energy infrastructure
Built to protect America from energy supply disruptions and national security threats, its infrastructure is ageing significantly; years of corrosion and wear have caused leaking pipes and failing pumps, and emergency drawdowns have compressed salt caverns and reduced the amount of emergency oil the reserve can store.
With SPR holding about 283 million barrels, its lowest since 1982, the US has a smaller emergency buffer to respond to major oil supply disruptions.
The Texan data centre challenge
Besides oil, electricity generation has been another major pillar of Texas’s energy dominance. However, as Texas data centres face growing power demand, the state faces a severe electricity-demand challenge. Texas provides data centres with more than $1 billion in tax breaks each year, and the growing development of these centres raises concerns about meeting their electricity demand. With 300 operating data centres, lawmakers are concerned and considering filing legislation to repeal the exemption.
The energy challenge posed by extreme weather events
Extreme weather events also pose another significant challenge to Texas’s energy security. Winter freezes, extreme summer heat, coastal storms, and hurricanes continue to test the resiliency of Texas’s energy infrastructure.
Hurricane Harvey
For instance, in 2017, Hurricane Harvey caused major operational disruptions to US Gulf Coast refineries. This resulted in a decline in inputs by 3.2 million barrels per day in 2017 during the week ending September 1, and increased the price of gasoline from $2.40 to $2.68 per gallon between August 28 2017 and September 4 2017.
Winter Storm Uri
In 2021, Winter Storm Uri also caused major disruptions and exposed vulnerabilities in Texas’s electricity generation and natural gas supply systems. During the storm, Texas natural gas production fell by 45%, and failures across multiple electricity generation sources contributed to widespread blackouts.
Extreme weather events cannot be prevented, and they demonstrate that Texas’ energy security also depends on its ability to withstand and recover from unexpected shocks.
The importance of energy issues in the 2026 midterm elections
With the 2026 midterm elections approaching, Texas’s energy challenges have become an increasingly important political issue.
As the nation’s largest energy-producing state, Texas faces critical decisions about balancing growing electricity demand, affordable energy prices, and infrastructure reliability.
The Texas US Senate race
US Senate candidates Ken Paxton and James Talarico have both focused on relief from rising energy costs and the development of the state’s data centres. Both candidates have called for ending the federal gas tax and restricting data centre development.
What should the Texas federal government prioritise?
Addressing the current challenges Texas’ energy industry is facing requires a comprehensive energy security strategy. First, the federal government should prioritise modernising the Strategic Petroleum Reserve’s ageing infrastructure and restoring its emergency response capacity.
Fix ageing oil infrastructure
While Texas remains a major oil producer, maintaining adequate emergency reserves is essential for protecting American consumers and businesses from supply disruptions. The federal government could replace ageing valves and piping, upgrade in-field monitoring and control systems, and craft a long-term maintenance strategy.
Data centres
For data centres, Texas policymakers should focus on expanding electricity generation and transmission while protecting local communities.
Although data centres create challenges for local communities, they are key to the continued provision of digital services across the US.
Rather than simply restricting new developments, Texas policymakers could require data centre operators to pay for the costs of expanding electricity generation and transmission, rather than passing those costs to local communities.
Increase energy efficiency and balance energy consumption
In addition, lawmakers should focus on reducing nonessential electricity consumption and strengthening existing tax incentive requirements by linking benefits to greater local job creation, improved water-use efficiency, reduced environmental impacts, and measures to protect households from additional electricity infrastructure costs.
Mitigating and adapting to extreme weather events
The most difficult policy concern is mitigating the impact of extreme weather events, since hurricanes, storms, and freezing temperatures cannot be prevented and may become more disruptive as climate risks intensify.
However, strengthening enforcement and inspection of winterisation requirements for natural gas facilities and power plants, building flood barriers around vulnerable refineries, installing backup power systems, and improving coordination between natural gas producers and electricity providers could improve Texas’s resilience to extreme weather.
Texas’s future as a major energy player
Texas will continue to remain significant for America’s energy future, but its resources and energy capacity alone cannot guarantee long-term energy security.
As the state faces growing issues, policymakers must look beyond increasing energy production. The upcoming midterm elections provide an opportunity to address these challenges and reconsider how the US approaches energy security.
Ultimately, the future of American energy security and Texas’s energy dominance will depend on how effectively it protects its infrastructure, meets growing demand, and responds to unexpected disruptions.
Yagiz Sullu, PhD, is a political risk and geopolitical analyst specialising in governance, international political economy, energy security, and strategic risk in developing and resource-dependent economies. He is the Founder and Lead Analyst at Sullu Strategic Advisory LLC among the first scholars to systematically examine how declining oil production influences authoritarian resilience. He has advanced new research on the political and economic consequences of resource depletion.
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