Behind the electric power industry, petroleum production, refining, storage, and distribution is the second largest segment of Mississippi’s energy sector, and these two sectors make up the vast majority of Mississippi’s energy sector. Because of high average wages in the energy industry and the wealth produced through the value chain, the sector has a disproportionate impact on the state’s economy. While direct employment in energy may only be about 2% of total state employment, the sector accounts for about 9% of state GDP.
Oil production in MS has increased due to unconventional production methods. First, the naturally occurring presence of CO2 along with decades of private pipeline infrastructure investment has enabled the growth of the enhanced oil recovery (EOR) industry, which injects CO2 into previously produced oil fields to significantly increase the productive life of the resource. EOR makes up more than half of all oil production in MS today and will hopefully continue to rise. The reversed trend from decreasing production to increasing production, which started around 2004, is due to EOR development.
Also hopefully contributing to growth in Mississippi oil production will be the development of the Tuscaloosa Marine Shale (TMS) in southwest MS. Drilling permits are up and development costs have decreased, but the drop in oil prices has now added to the economic and technical challenges of the TMS. Growth in production is expected, but the rate in growth ahead, due to the marginal economics of this shale play compared to others, is unknown. Oil prices will dictate investment levels in 2015 and beyond.
MEI President Patrick Sullivan was recently featured in a Hattiesburg American article (read that here) detailing Mississippi’s current low gas prices. We discussed in detail back in 2012 exactly why Mississippi fares better than the rest of the country when it comes to gasoline prices. Read that piece below:
Mississippi Faring Better Than Most When It Comes to Gasoline Prices
An Opinion-Editorial by MEI President Patrick Sullivan published May 11, 2012 by the Clarion Ledger
If you’re like most Americans, you’re worried about the recent rise of gasoline prices and where it’s going from here. But for those who like to look at the bright side of things, it could be worse. At least you’re not filling up your tank up in California or worse, Europe. A gallon of gas in California costs $4.35, 70 cents more than a gallon in Mississippi, and a gallon in the United Kingdom costs the equivalent of $8.23. Additionally, California households pay 52% more per kilowatt hour than we do for electric power, while Londoners pay 130% more for power than Mississippians.
Data shows Mississippi has an energy cost advantage over the national average and a significant edge over places like California and Europe. Why? Mississippi’s energy policy is intentionally and rightfully geared towards diversity, supply and affordability. California’s and Europe’s policies are obviously focused on something other than delivering reliable, affordable energy to those who want it and need it.
Going forward, this is a major advantage for us. Mississippi’s energy situation is a microcosm of what the vast majority of Americans want in an energy policy for our country.
So other than the fact that almost everyone prefers to pay less for energy, why does this matter? From a macro perspective, this is clear evidence of a more favorable supply/demand ratio here, a reasonable and pro-growth regulatory system, and a more favorable tax environment (taxes make up a majority of Europe’s costs). These together add up to more opportunities and more serious looks from investors, i.e. job creators.
Proximity to oil production and refining, an abundance of pipeline assets, diversity in electric power production, and importantly, the state’s hospitable attitude toward those looking to invest big bucks in energy projects are major reasons we pay less at the pump and less to power our homes and businesses.
Not only does this result in more disposable income for families and businesses, but this gives us an edge in today’s incredibly competitive economic development arena. Industrial and manufacturing businesses are looking to site their operations to be in places where energy is available and more affordable than the competition, and today’s competition is not only other states but the rest of the world.
As our state continues to embrace energy supply as a major part of the economic development toolbox, Mississippi will see the payoff in investment and good-paying jobs.
In some more good news for energy consumers, AAA is predicting drivers will pay less for gas prices in 2014 compared to the year before. AAA predicts a 5 cent drop in the average price of a gallon of gasoline this year due to increased domestic oil production, increased refining capacity, and reduced demand.
This confluence of increased supply, coupled with lower demand helped drive down average gas prices in 2013 to their lowest level since 2010. In 2013, the average price of a gallon of regular gas was $3.49, compared with $3.60 in 2012 and $3.51 in 2011, AAA said.
Meanwhile, domestic crude oil and natural gas production has hit quarter century highs, led by dramatic gains in Texas, North Dakota, Pennsylvania and Colorado. These states are home to energy rich shale rock formations which can be fracked to release vast stores of energy.
The Energy Information Administration predicts that prices will steadily decline for the next two years, as domestic oil and gas production continues to rise, reducing the cost of transporting crude oil and ultimately, prices at the pump.r County. Their goal is to make energy Beyond Affordable.