Tesla’s Texas Takeover Will Impact Oil-Dependent Houston

In a new article by the Houston Chronicle, the author penned his thoughts on how Tesla’s “Texas takeover” would impact oil-dependent Houston. The article pointed out that it will be at least three years before Giga Texas is fully built. That may seem slow, but this is going to be a massive factory. I recently wrote this article trying to give a glimpse of just how large this factory will become, and Elon Musk just tweeted out a few additional details as well.

Elon Musk described the factory as “shaped like a diamond and aligned on true north.” He also shared some insight into the design. This factory will be so big that Tesla Semi trucks will be able to drive inside through the factory. This is also possible due to the fact that the Semi produces no pollution.

Tesla has gotten pretty efficient with building factories, but it may well take around three years before this factory is complete. Tesla Giga Texas will be manufacturing larger than normal EVs (the Tesla Semi and the Cybertruck) as well as the Model 3 and Model Y, so it makes sense it will be a massive factory. Also, two of those vehicle will be brand new models.

It makes sense that Giga Texas will be built in the “heart of oil country, where the gas-guzzling Ford F-150 pickup reigns supreme,” as the Houston Chronicle noted. The article pointed out that this is another sign of the accelerating energy transition that will have “profound implications for Houston’s oil-dependent economy.”

Dan McDowell, president of InfoNation, which is a Sugar Land–based automobile data provider, shared his thoughts with the Houston Chronicle. “It’s going to be a while before (sales of) EVs outpace combustion-engine vehicles, but it’s coming. If oil companies are smart, if they want to survive well into the future, they’ll start putting charging stations in.”

Tesla is moving into the nation’s top oil-producing state during a time when many — countries, companies, and consumers — are marching forward in the direction of a future that has no room for fossil fuel dependency. The article noted that this is a symbolic sign of the global energy shift that is emphasized by Tesla’s market value surpassing that of Texas-based oil major ExxonMobil. Tesla is now worth far more than two times Exxon’s market value. Tesla [NASDAQ:TSLA] is at a market cap of $395 billion, while ExxonMobil [NYSE:XOM] is under $153 billion.

The article pointed out that the International Energy Agency estimated that EVs displaced almost 600,000 barrels of oil products per day in 2019. This number is expected to grow to 2.5 million barrels daily by 2030, and that’s based on fairly conservative forecasts.

Mike Sommers, President at the American Petroleum Institute, told the Houston Chronicle that he wasn’t too worried about Tesla’s rise, nor the projected growth of EVs wiping out demand for oil and gas. “Anything that brings in new high-tech jobs like Tesla is good for Texas,” Sommers said. “But when you plug in a Tesla, you’re still using fossil fuels. It’s great the state is getting more jobs with Tesla, but this country is going to continue to depend on oil and gas.”

What Sommers and others who think along the same lines as he does regarding electricity do not seem to realize is that coal is at its lowest in decades, while renewables are on the rise. Renewable energy accounted for 22.2% of U.S. electricity generation in the first half of the year, solidly passing up coal. That may not seem like a large number, but it’s almost a quarter of all electricity generated in the US, and it speaks volumes in regards to the demand for sustainability as well as the growing competitiveness of renewables.

It should also be noted that, while also being an automaker, Tesla is an energy company that provides renewable energy alternatives such as solar and battery storage.

How Will Tesla Impact Houston’s Oil-Dependent Economy?

I believe that not only will Tesla affect Houston’s economy, but also the economies of the neighboring states that produce oil and fossil-fuel based products. And it won’t be pretty — unless these companies start producing products that are not made from fossil fuels. BP is one such company that has taken steps in that direction.

Exxon has been slower to start expanding, and it still has several plants in Louisiana, plants that were affected by recent hurricanes. These damages, compounded with the pandemic and compounded yet again by Tesla’s move into Texas, will be reflected in coming years. Tesla’s Texas factory isn’t built yet, but once it is online and producing vehicles at what China calls “Tesla Speed,” the fossil fuel industry had better hope that it is prepared to transform or be fully taken over by not just Tesla, but by a variety of companies that are focused on clean energy, renewables, and EVs.

Texas may have big oil as its shadow for many years to come, but with Tesla in the picture, that shadow will eventually fade away into the sunset.