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November 2, 2018

Volume 40, Number 31

This story has nothing to do with political campaigning.  (Youre being bombarded with enough of those stories prior to next weeks important election.)  Lets focus instead on some developments that will have significant economic benefits for the Austin area, in fact for the entire state of Texas.  The benefits are long range, but will take a long time to implement.

Business leaders and economists alike breathed a sigh of relief when the new three-nation trade deal was announced.  The US-Mexico-Canada Agreement (USMCA) replaces the North American Free Trade Agreement (NAFTA).  Get used to the new initials, because the agreement, once implemented, will be very important for the Austin, and Texas, economy. The key words in the previous sentence were “once implemented,” because the process is long and arduous.  Its been a long time coming and will be a long time before it might go into effect.  And the implementation process could hit a few political stumbling blocks.  The agreement is still not officially signed.  The agreement will be signed November 30th, Mexican President Enrique Pena Nietos last day in office.

Now comes the hard part,” observes Austinite Jack Martin who is the global Chair/CEO of Hill+Knowlton Strategies.  Martin points out USMCA will not go into effect until it gets legislative approval in all three countries.  “No one expects this to be much of a problem in Canada or Mexico.  But early next year, USMCA will arrive before the US Congress, which is when the task at hand moves from private negotiations to public salesmanship.”

Winning over America will be the hard part,” Martin predicted, “as it was in passing NAFTA in the ’90s.  It was, safe to say, an uphill fight.  Back then, the key to passing NAFTA was getting enough support from Democrats.  The core of opposition was led by labor unions.”

Now, what?  “There could be a devil hiding in USMCAs details that we dont know about yet,” Martin noted.  And the process itself is complicated.  Both the USHouse and USSenate must ratify the Agreement and they can only vote up or downNo amendments are allowed.  Also Congress can only start consideration when the administration decides to send it to Congress.  And, Martin says “what is likely to happen is that the administration will submit the legislation when it has the votes to pass it.”  Take a deep breath and be patient. Read More

October 5, 2018

Volume 40, Number 27

The price of oil is surging toward an extremely high price of $100 a barrel.  In fact, this week the price moved up to bounce around $80/barrel.  Good for the Texas awl bidness.”  Good for state government, as tax revenue is pouring into state coffers in advance of the Texas legislative session starting in January.  Good for the Texas economy.  Yes, but.  What about the price of gasoline you pay at the pump for personal and business driving?  Good question.

There are predictions that the price of gasoline will be increasing, even though the summer heavy driving season is behind us and the demand theoretically is lessened.  It’s a logical forecast.  After all, it is costing more to buy and then process crude oil.  So it isn’t surprising to expect the price at the pump may go up.  If it does, though, how high could it go?

As of mid-week, the price for a gallon of regular gas at Costco on Austins Research Blvd. was $2.48/gal.  (Admittedly, Costco generally has some of the lowest prices around.)  This is the same price range, slightly up and down, seen at Costco through the busy summer travel months.

Know what the gas price is in California?  “Gasoline prices are climbing toward $4.00 a gallon in Southern California, boosted in large part by a rise in worldwide crude oil prices,” reported the Los Angeles Times.  “The average pump price for regular gas in the Los Angeles-Long Beach area stood at $3.77.”

Wait a minute.  If crude prices were the biggest culprit, wouldnt you think similar prices could be found in Austin and all over the US where the price of crude is the same?  Hasn’t happened.  Something else is happening in LaLa Land.

The truth is that California policies, including its high state taxes on gasoline and diesel, drive up prices,” observed the conservative think tank Texas Public Policy Foundation.  “Regulations and corporate taxes also play a big role in determining refinery operating costs as well as expenses throughout the entire supply chain.  That’s why prices are rising, especially in California.”

You’ll probably always pay more at the pump in high-tax states than here in Austin or around Texas.  Competition and volume also play a part.  Still, the price you pay will likely rise.  See the next story. Read More

September 14, 2018

Volume 40, Number 24

The Texas economy especially as it impacts the Austin area is so strong it has triggered an action not taken in 30 years.  State government, so important in Austin, is benefitting significantly from what is happening throughout the state not to mention the impact of the red-hot Austin economy.  All this is due to better-than-expected economic and revenue growth around Texas.

We’ve long maintained the Austin area is uniquely positioned economically.  Steady government paychecks provide a solid underpinning for the area.  In general, these jobs are not subject to ups-and-downs or twists-and-turns of the private sector.  So, add to this, the Silicon Hills of Austin is right now riding the crest of tech-driven private sector job growth, that is the envy of the rest of the nation.

Consider this:  the sky-rocketing Austin private sector tech economy is set to get a rocket-boost from normally-staid state government.  What?  How’s this?  The Texas Legislature that sets budget parameters for the many state agencies in Austin doesn’t even meet for almost four months.

Texas Comptroller Glenn Hegar, by law, is the state official who decides money guidelines the legislature must follow.  He says to legislators “this is how much money you will have to spend during the next two years of the biennium and you cant spend any more than that.”  Last October, he issued his forecast for fiscal year 2019.

For the first time other than a legislative session in 30 years, the State Comptroller has increased his certified revenue estimate he made last October.  And it was a big increase.  Remember, the Texas Legislature meets only once every two years for 140 days.  So its a big deal for setting a two-year budget.

His reason for saying state agencies will have more money to spend starting in 2019 than earlier predicted are several fold:  sales tax revenue is up 10.5% over FY 2017 … oil/gas natural gas production tax revenue is up 56.1% … general revenue-related revenue, up 9.3%, etc.

The legislature will have more money to dole out.  If state agencies get bigger bucks, it will mean bigger paychecks circulating through the Austin economy.  A nice future boost. Read More

August 24, 2018

Volume 40, Number 21

Things are going so well in the Austin area right now you might be tempted to pinch yourself to see if youre dreaming.  This is especially true if you happen to remember two past disruptions that caused some serious damage the dot-com bust and the real estate recession.  They occurred in Austin less than 20 years ago.  And, they were like a slap upside the head.  A lot of people and companies were seriously hurt or even destroyed.

This report is not intended to be a downer.  And it’s not a dull recitation of local history.  But, there are so many new residents in the area, it might be helpful to remind them they have arrived at a great time.  Those who have lived/worked here for at least twenty years have vivid memories of when times were not-so-great.  And, more importantly, many of those who survived those times are responsible for Austin’s economic success stories today.

Think about this.  Roughly a million people have moved into Austin and the surrounding areas in the 5-county metro during the decades following the two downturns.  They didn’t experience the hard times.  All they’ve seen is one of the most amazing periods of expansion experienced by any major world city.

Many of these new residents are pulling down compensation greater than those who were hammered by the downturns.  A lot of them are living and/or working in gleaming, modern towers downtown – or, in new office buildings, apartments and homes outside the Central Business District.

The downtown newbies probably can’t comprehend “see-through office buildings, where three million square feet of office space had to go begging – even though the spaces were cut-rate subleases from leases businesses committed to prior to the recession.  This is as much space as six Frost Bank Towers!

Here’s one example that vividly illustrates the contrast between then and now.  Drive to Fifth and San Antonio Streets downtown.  Marvel at the architecturally-significant Federal Office Building that will still be standing on that site a century from now.  At one point, global semiconductor chipmaker Intel started building a $124 million tower on that site.  Then as the dot-com debacle hit, Intel pulled the plug half-way into the project in March 2001.  For six years, the “Intel Shell” reminded all of what might have been.  The takeaway:  Recent residents will do well to understand what they have inherited.  This is a special place. Read More

June 22, 2018

Volume 40, Number 12

Too often the debate about energy sources becomes an us-versus-them discussion – “fossil-fuels-versus-alternative-fuels.”  Energy is vital to Austin and the rest of Texas.  Texas is a world leader in fossil fuels with enormous oil and gas availability.  Not as well-known, is the fact that Texas is fast becoming a leader in capacity to generate electricity from an alternative fuel source -- wind power.  Its an enviable position.  With such a wealth of resources, how about peaceful coexistence in Texas as an energy policy?

The City of Austin has committed big bucks far into the future to use wind power to generate electricity, while currently relying on other sources such as natural gas, coal-fired power, nuclear power and solar (which will be discussed at a later date).  Wind is an important and growing part of the Austin economy.  So, just how big is wind in Texas?

According to Texas economist Ray Perryman, Texas capacity of 22,799 megawatts is larger than most countries around the world.  And in the US, Texas capacity is triple that of second-place Oklahoma.  The Lone Star State also tops the list for capacity currently under development.

Just as with fossil fuels, geography is key.  Texas has abundant land with the right wind speedsAdditionally, there have been billions of dollars of investments in transmission lines that are needed to get wind power from the often rural areas, where it is generated, to Austin and other growing population centers where it is needed.

It’s not been widely discussed, but development of wind power has been an economic boon.  The American Wind Energy Association estimates more than $42 billion has been invested in Texas wind farms, creating jobs during construction, and to a lesser extent, on an ongoing basis through operations and maintenance, Perryman reports.

In addition to the economic benefits of the industry itself, wind generation capacity works to reduce electric power prices,” Perryman continued.  And wind gives electric power customers more choices.  There are also more benefits.

How many states would love to have Texas oil/gas/wind energy resources?  This situation will inure to the economic benefit for Austin and the rest of the state for generations. Read More

April 27, 2018

Volume 40, Number 4

Even as oil and gas production enjoys another resurgence in Texas, the state has issued a positive report on solar powers momentum as a separate energy source.  “The long-term prospects seem as bright as the Texas sun,” said Glenn Hegar, Texas Comptroller of Public Accounts.  And, the cities of Austin and Georgetown were cited as examples of early adopters of the technology.

Ten years ago, Texas’ solar industry was fairly small, but today some believe it’s ready to take on a much larger share of the states energy needs, according to a report by Patrick Graves and Bruce Wright, of the State Comptroller’s office.  How big is the Texas solar industry?

Nearly 8,900 Texans work in the solar industry, in manufacturing, installation, sales, distribution and more,” Hegar noted.  “Our state has 532 solar companies and nearly 100 solar manufacturers.”  Hegar did acknowledge the Texas solar industry is “a relatively small slice of the national industry,” but went on to say “its growing rapidly, driven by improved technology and falling prices.”

Research fellow with the Energy Institute at UTAustin Roger Duncan sayssolar is where wind was 10 years ago and he believes the economics of solar power are as good as wind energy, and maybe better.”

Austin was cited as being at the forefront of using these new energy sources:  “Between solar and its wind-power resources, Austin expects to be able to meet more than half of its total needs with renewable energies by 2020,” the Comptroller’s report noted.

It also pointed out nearby Georgetown signed agreements recently that will allow “Georgetowns municipally-owned utility to rely entirely on wind and solar sources.  The city will sell excess power to ERCOT, the states power grid, which will also provide backup power for Georgetown in the event of any shortfall in its power resources.”

To be sure, “there are still unknowns that may rock the industry, including the fate of an important federal tax credit and a recent tariff on foreign-made solar panels,” said Hegar. Read More

April 13, 2018

Volume 40, Number 2

Dont know if you noticed, but the #2 person in line to become US president spent a lot of time in Austin this past week while the USCongress was in recess.  House Speaker Paul Ryan also hit other cities to preach the administration gospel and raise money.  But, he also participated in a 3-day Republican retreat in Austin, discussing politics and policyAll this was before Ryan announced Wednesday he was retiring at the end of his term in Congress.

According to the Texas Tribune (TT), Ryan has just concluded a swing through Texas that included a retreat in Austin with about 100 GOP donors.  Additionally he held fundraisers in Dallas, San Antonio and Corpus Christi.  Along the way, he was promoting new legislation like last year’s sweeping tax overhaul.

The Wisconsin Republican raised almost $4 million with these events – quite a haul.  Where did the money go?  It went to “Team Ryan” -- a joint fundraising committee composed of Speaker Ryan and other Republicans running for Congress, reports TT.

Three Texas GOP Congressmen have been publicly targeted for defeat by the Democrats – Will Hurd from Helotes, John Culberson from Houston and Pete Sessions in Dallas.  Some of this money will go to help their re-election.

Make no mistake.  There were a lot of Republican heavy-hitters here in Austin, both elected and powerbrokers.  The focus was on elections later this year.  It is somewhat interesting Austin was chosen for this politically-oriented retreat.  After all, Austin leans heavily democratic.  (Apparently, the attractions of our fair city appeal to a wide political spectrum.)

Ryans retreat and fundraisers were private affairs, but he did make a few public appearances, including stopping by the Austin Police Department to thank local officers for their response to the deadly bombings last month.  This rare, high-level GOP concentration in Austin – albeit briefly -- brings to mind the enthusiasm powering local Democrats.  As we mentioned two weeks ago, there are three Democratic Party runoffs May 22nd that will determine which candidate will run against local GOP Congressmen Michael McCaul and Roger Williams, as well as, who will contend for the seat left vacant by Lamar Smith, who decided not to seek re-election. Read More

March 23, 2018

Volume 39, Number 49

Jobs data for the Austin area can sometimes be confusing and contradictory.  One reason is the gatherer/keeper of such stats, the Bureau of Labor Statistics, regularly revises its numbers.  The March 2018 revision changed the Austin areas employment stats from great to even greater.  How about that!  And even before revisions, Austins job growth is the 2nd best performing among the nations 50 largest metros.

The latest figs:  Austin added 36,900 net new jobs in the 12 months ending in January, making Austin the second best performing metro area among the nation’s 50 largest.  Its very strong 3.7% growth is, by far, tops in TexasDallas (up 2.6%), Houston (up 2.2%), Fort Worth (up 2.1%) and San Antonio (up 2.0%) ranking 12th, 17th, 18th and 21st respectively, according to Beverly Kerr, the Austin Chamber’s VP/Research.  This data is not seasonally adjusted.

But look what happens when you adjust the mind-numbing numbers seasonally, taking in a number of factors, including taking into account state and federal unemployment insurance.  In the Austin metros case, the adjusted numbers usually reflect a better economy.

For instance, “preliminary 2017 estimates for jobs in Austin have been revised upward,” noted KerrThe job growth percentages got better – going from previously estimated 2.7% to 3.2% -- a significant increase.

When you dive a bit deeper in the numbers, some interesting tidbits emerge.  As an example, Austins sizable government sector lost 2,800 jobs over the past 12 months.  When we say “sizable,” the government sector includes more than 17% of the jobs in the area.  Yet, the job picture grew despite this loss.  Impressive.

So, which portions of the Austin private sector grew?  Darn near all of them.  Professional and business jobs grew by 12,500 over the past 12 months at a rate of 7.4%.  But, manufacturing jobs grew the fastest, at 9.2%, when adding 4,600 jobs.  Only retail lost jobs in the past year – just 200, for a rate of -0.2%.

One aspect of positive economic growth is just now showing signs for even better growth in the very near future.  Get ready for it.  The next oil/gas surge is starting to happen in Texas and this will help state government as well as the overall economy.  Check the next item. Read More

March 9, 2018

Volume 39, Number 47

Longtime residents know to stay clear of downtown Austin when Spring Break and South by Southwest (SXSW) coincide during the same week as they will next week (in fact, the 10-day SXSW congestion starts today).  Once the nightmarish crowds begin to flock to the downtown area, many residents just leave town.  But this year, theres good news for those leaving via the Austin airport, as numerous projects to reduce airport congestion are nearing completion.

There’s no way to avoid the fact that this annual influx of crowds to Austin impacts the Austin-Bergstrom International Airport (ABIA).  To give you an idea of the scope, consider this:  Scandinavian Airlines (SAS) for the first time is operating two nonstop, round-trip flights between Stockholm, Sweden and ABIA just for SXSW.  This marks the first flights for SAS at ABIA, and the first nonstop flights ever between Austin and Stockholm.

Add to this, total passenger traffic at ABIA for January 2018 was UP 13.2% compared to the same month in 2017 (a year that smashed passenger total records).  And, January is traditionally the month with the fewest passengers.  So, construction at ABIA can’t be completed soon enough.

What are some of the new changes at ABIA?  A new retail component outside airport security is nearly 85% complete at the same location as the previous free cell phone lot.  In addition to 50 new cell phone parking spaces for those waiting to pick up arriving passengers, the retail complex will include ten covered Texaco gas pumps, a convenience store, a drive-thru Austin Java coffee store, a Subway sandwich and a taco shop.  And, for all the local hybrid cars owners, there will also be electric car charging stations available.

These improvements were undertaken to help ease longtime congestion at ABIA due to passenger pickups from (sometimes-delayed) incoming flights.  And, to further keep cars from “cruising” around ABIA waiting on arriving passengers, the new retail complex will also have picnic tables, restrooms and an aviation-themed playground for kids. (By the way, the air carrier dominance at ABIA shows no sign of changing.  In January, Southwest Airlines passenger total was 396,931 … #2 American Airlines’ total was 200,256 … #3 United Airlines passenger numbers were 148,312 and #4 Delta Air Lines carried 131,494 passengers.  Each of the remaining air carrier totals serving ABIA dipped to five digits, not six). Read More

February 23, 2018

Volume 39, Number 45

As you might imagine, there has been quite a to-do after the Austin City Council voted to make Austin the first city in Texas to mandate/require that private businesses provide their employees paid sick leave.  It wasnt even close.  After much debate, the vote was 9-2 to implement the policy.  Now what?  Lets examine what is likely to happen now.

First of all, start with the fact the Councils controversial action is not slated to go into effect until October 1, 2018.  Private businesses with five or fewer employees were not exempted from the ordinance, but they won’t be required to provide paid sick leave until October, 2020. How much paid sick leave is required?  A worker can accrue up to 64 hours, or eight days, of paid sick leave per year.  Small businesses, with 15 or fewer employees, get a slight break.  Workers at small businesses can accrue up to 48 hours, or six work days, of paid sick leave per year.

When we mentioned there has been a “to-do” since the controversial decision, criticism came from several quarters.  Check our Archives for the 2.2.18 edition where we detailed the opposition position from the Austin Chamber of Commerce.  Additionally it asked the vote be delayed 90 days – didn’t happen.

A TV station from Houston jumped on this story.  It interviewed Austin business owner, Peter Morales, who told KHOU “I have several friends in the construction industry, several companies, that are “specifically saying they are going to move outside the city limits.”  A conservative policy group weighed in saying the City of Austin “should ease regulations that prevent businesses from locating here, staying here and expanding here.  Instead, they add new ones.”

The most significant opposition came from a local State Senator (Donna Campbell) and a local State Representative (Paul Workman).  They can do more than simply wring their hands and express dissatisfaction – they can get it overturned in the State Legislature.  And, they indicated they will do just that, having already lined up support to overturn Austin’s action. While the Legislature has regularly overturned what it terms “Austin overreach,” the problem is the Legislature doesnt meet until January 2019, three months after Austin’s paid sick leave ordinance goes into effect.  No one has yet publicly stated what might happen during this interim.  Dont be surprised, though, to see some sort of legal delaying action take place.  Stay tuned. Read More