Seaports have been centers of commerce for centuries (millennia, in fact), and they remain crucial to the economy today.
Every year, hundreds of billions of dollars’ worth of products move through U.S. ports.
Ports generate substantial business activity through their operations, but those benefits are dwarfed by the huge importance of water transportation to other industries.
Texas ports are a crucial component of the national system. Three of the top six U.S. ports as measured by total tonnage are in Texas, with Houston second, Beaumont fifth, and Corpus Christi sixth. Texas City and Port Arthur also rank in the top 20 national ports (as of 2015). Total tonnage includes both domestic and foreign shipments, and Houston is by far the largest port (as measured by tonnage) for foreign shipments.
A substantial portion of U.S. business activity in a variety of industries is driven by international trade, and the value of foreign trade has risen substantially over the past 25 years. In 1992, U.S. exports of goods and services totaled almost $616.9 billion, and imports were just over $656.1 billion (according to data maintained by the U.S. Census Bureau). Last year, U.S. exports reached $2.2 trillion, while imports totaled more than $2.7 trillion. Although trade volumes are affected by global economic conditions and have decreased slightly over the past few years, trade volumes are expected to rise in the future, increasing the importance of ports and waterways.
In addition to overall growth in trade, other forces are at work to increase the role of ports in the economy, particularly in Texas. One factor is the development of the export market for liquified natural gas (LNG). With Texas’ large supply of natural gas, the development of technologies to liquify the natural gas and thereby convert it to a form which can be shipped to markets around the world is a game changer. In February 2016, Cheniere Energy shipped a carrier of LNG from its Sabine Pass LNG terminal to Brazil, and shipped more than 100 carriers to 18 countries on five continents in a little over a year. Cheniere is expanding its facilities, and many other companies are also operating or constructing LNG facilities.
Given its desirable environmental properties, global demand for natural gas is projected to grow, and LNG exports via Texas ports and waterways are expected to continue to increase. Opening this additional market for Texas natural gas will increase production and exploration over where they would be otherwise. The benefits in terms of jobs and business activity are in the billions, and are notable even in an economy the size of Texas’.
Another factor is the removal of the 40-year-old oil export ban in late 2015. Domestic oil production rose substantially as a result of new technologies such as hydraulic fracturing (fracking), which has been increasingly utilized the past several years. By allowing access to global markets for U.S. oil, lifting the ban will lead to increased oil production over time compared to the situation without exports. In fact, I recently estimated that overall job creation from expanded crude exports will be about 312,500 for Texas and 484,400 for the U.S. by 2045. As a result of this potential, several major pipelines are being added to connect Texas oil fields to Gulf Coast ports.
Numerous expansion projects totaling billions of dollars in capital investments have been announced, are under construction, or have been completed near Texas ports over the past several years. These projects include LNG export facilities, refineries, and chemical plants as well as related manufacturing facilities. Projects by companies such as Cheniere Energy, Sempra Energy, ExxonMobil, Phillips 66, Motiva, and many others are generating economic development along the Texas Gulf coast. With these new locations and expansions, Texas ports and waterways have become even more important as they are essential to the shipment of inputs to these facilities and finished products from them to markets around the world.
In addition to energy, a number of other industries (such as agriculture) also rely on water shipping to reach export markets. Many Texas firms need shipping to obtain input goods for their production processes, and consumers benefit from the delivery of various products from countries around the world.
In response to likely future needs both in terms of higher volumes and larger vessels enabled by the opening of the expanded Panama Canal, several ports and waterways are in the process of improvements such as deepening and widening channels. These projects involve substantial economic benefits in terms of efficiency and ensuring Texas remains an attractive location for businesses which rely on shipping, and they are worthy of support. Without a doubt, ports are crucial to the economy of Texas, and their importance will only grow over time.
Editor’s Note: The main image accompanying the above guest column shows the Theo T heading to sea from the Port of Corpus Christi on Dec. 31, 2015, with the first export of crude oil since Congress lifted the ban Dec. 18, 2015. Photo courtesy Port of Corpus Christi.