Texas: supplier of last resort, buyer of first resort

On July 22 the Texas grid set an all time record. Demand peaked at 91.1 gigawatts, six gigawatts above the 2023 record that had stood for three summers, and the system met it with natural gas supplying about 48 percent and solar about 32 percent. No emergency was declared. ERCOT has now broken its own record several times this summer without so much as a conservation alert, which is not what anyone predicted after the winter of 2021.

That same week, the Strait of Hormuz was running at roughly a fifth of its normal flow, Saudi Arabia's East West pipeline was days from being shut by attacks, and the diesel crack spread in the United States was on its way to $106 a barrel, a number it had never touched. Corpus Christi was loading crude at a pace above 2.4 million barrels a day and Golden Pass was ramping its second LNG train on the upper coast.

Those two facts describe the same place. Texas is where the world is buying energy it cannot get elsewhere, and Texas is where power demand is growing faster than anywhere in the country. The state is the marginal supplier abroad and the marginal buyer at home, at the same moment, and both of those roles are being tested this fall by things it does not control.

This piece is about the whole state, so it carries no pin. It is the frame the county pieces sit inside.

The demand side: power

The 91.1 gigawatt peak is the fact to start from because it is the one that has changed the most. ERCOT's peak load grew about six gigawatts a year in 2022 and 2023, a pace that strained the system and sent wholesale prices to the cap for hours at a stretch. It grew another six this summer, and the system barely noticed. About 53 gigawatts of solar capacity is installed in Texas now, up from almost nothing a decade ago, and on the day of the record, solar was producing 35 gigawatts at the moment it mattered. The afternoon peak has been solved. The evening ramp and the winter are the remaining questions.

What is behind the growth is not air conditioning. It is the interconnection queue. As of the governor's August 3 letter, ERCOT was evaluating roughly 474 gigawatts of requests to connect to the grid, more than five times the record it had just set, and about 90 percent of those requests were data centers. The Texas Tribune counts at least 596 data centers operating or planned across the state. ERCOT's own preliminary long term forecast, filed in April, projects something like 368 gigawatts of demand by 2032 if every requested load materializes. ERCOT does not believe that number, and said so in the filing. Its working assumption is a peak somewhere around 98 to 112 gigawatts within a few years, which would still be the fastest load growth of any grid in the country.

Then the governor stepped in. On August 3, citing data centers that had failed to comply with a state survey of their water and power use, Abbott directed the Public Utility Commission and ERCOT to audit every data center in the interconnection process before any additional project advances, and to deny grid access to any that fail. ERCOT paused its Batch Zero study, the first structured review of large load requests, and said it would complete the audit of roughly 300 proposals by December. Projects already under construction with contracted in service dates are now waiting on a state review with no fixed timeline. Lawyers representing the industry are telling developers to reread their force majeure clauses.

The audit is a headwind and it is also a filter. Most of the 474 gigawatts was never going to be built; a queue that size is mostly developers reserving optionality. What comes out of the audit in December is the first real number for how much of it is serious, and that number is worth more to anyone underwriting Texas power, land, or transmission than any forecast published before it.

The supply side: everything else

The Iran conflict took something like a fifth of the world's LNG and a comparable share of seaborne crude off the market, depending on the week and which strait was passable. The United States is the largest producer of both, and Texas is where most of it leaves.

Corpus Christi handled 54.5 million tons in the first quarter, the strongest quarter in the port's history, with crude exports above 2.4 million barrels a day in March and LNG volumes up about a third on the year. The port's CEO put LNG shipments up 40 percent by late spring. Golden Pass, the ExxonMobil and QatarEnergy terminal at Sabine Pass, sent its first cargo to Italy in April and was expected to have its second train running by early fall. Cheniere's Corpus Christi expansion has been bringing its seven smaller trains online through the year. National LNG export capacity goes from about 17 billion cubic feet a day at the end of last year to more than 19 this year, and nearly all of the increase is on the Texas coast.

Refining is where the squeeze is most visible. Roughly a third of American refining capacity sits between Beaumont and Corpus Christi. With global diesel supply short, the margin on turning a barrel of crude into a barrel of diesel hit a record $106 on September 1, having more than tripled since February. Retail diesel is at $6.20 a gallon nationally. Distillate inventories are at their lowest level for the season since the 1950s because product is being exported to cover the global gap, and the White House called four large refiners in to discuss it, three of them headquartered in Texas.

The Permian is producing around six million barrels a day, more than all but a handful of countries. The state's oil and gas severance taxes will have a very good year.

That is the supplier of last resort. It is also a state where the person hauling cotton off the High Plains is paying $6.20 at the pump, and the money moves from one end of the invoice to the other inside the same border. Record margin at the refinery gate. Record cost at every gate after it.

What is pulling the other way

Four things, in order of how much they matter to anyone deploying capital in Texas this year.

Interest rates. At the start of 2026 the market priced four rate cuts by the middle of next year. It now prices four hikes. That is a 200 basis point swing in expectations inside nine months, driven by the oil shock feeding into inflation prints, and the Fed meets on Wednesday with a hike at better than even odds. The 10 year Treasury is at its highest since last October. Two weeks ago the Treasury Department began buying back long dated bonds, funded with bill issuance, in an explicit attempt to hold the long end down.

For Texas real estate the mechanics are specific. Mortgages and cap rates price off the 10 year, so a policy that pins the long end while the short end rises does not necessarily push home loan rates up. But every builder in the state offering a temporary rate buydown, which is most of them in Katy, Cypress, Dripping Springs, and the Austin suburbs, is funding that buydown off the short end. The discounts that have been holding new home sales together got more expensive to give, and they got more expensive the week before the meeting.

Labor. The Dallas Fed's forecast for Texas job growth started the year at 1.9 percent and has drifted toward 1.1. The reasons it gives are declining immigration constraining labor supply, productivity gains suppressing demand for workers, and softening in its own business surveys. National labor force participation fell to a five year low this month. Texas has outgrown the state forecast in the metros, with Dallas running above 3 percent annualized in June, but the ceiling is lower than it was, and the sectors most exposed to the immigration decline, construction and agriculture, are the same sectors that build the houses and harvest the cotton.

Housing. The three big metros are in three different places, and the state as a whole is a buyer's market. Houston has 130 percent more sellers than buyers by Redfin's count and the second highest contract cancellation rate of any metro in the country at 19.6 percent. Austin's median is a fifth below its 2022 peak with net domestic outflow from Travis County two years running. Dallas Fort Worth is the exception, with inventory tightening while everyone else's loosens, and prices down only 1.7 percent on the year. Nationally, new homes priced below existing homes this spring for the first time on record, and that inversion is a Texas suburb phenomenon showing up in the national median. None of this is collapse. All of it is the end of the 2021 to 2022 story, and the state has more houses than it has buyers for at current rates.

The cost of owning anything here. Texas homeowners insurance premiums rose about 60 percent between 2019 and 2024, double the national increase, and the average Texas homeowner now pays roughly $4,585 a year, more than twice the national figure. The pace has slowed sharply, from 18.7 percent growth in 2024 to 4.3 percent in 2025 by the Texas Department of Insurance's count, as reinsurance prices ease. But building costs have not: tariffs have raised material prices and immigration enforcement has raised construction wages, and both flow into replacement cost, which is what a premium is priced on. The state's answer on the tax side, a $140,000 homestead exemption up from $100,000, is real relief for the median homeowner and none at all for a landlord.

Two smaller ones worth naming. The governor's audit is a governance risk as much as a power one; Texas has never before paused an entire category of grid connections by executive letter, and the precedent is now set. And the state is a party to a trade war it did not start: Texas is the largest exporting state in the country, Mexico is its largest partner, and Canada is a top destination for most states' goods. Tariff escalation with either lands here before it lands anywhere else.

What would change the picture

The state is not a single trade. But every county piece we publish sits inside these conditions, and the conditions are what we would watch before deploying anywhere in Texas this year.

• The audit finishing by December with a real number. Whatever fraction of the 474 gigawatts survives verification is the first honest measure of Texas data center demand. Everything published before it is a developer's reservation, not a forecast.
• The Fed's path settling. Four hikes priced is a market guess, not a plan. A Fed that hikes Wednesday and signals a pause is a different environment from one that hikes and keeps going, and Texas real estate cannot be underwritten until the difference is known.
• Texas job growth back above 1.5 percent in the Dallas Fed's forecast. The metros are carrying the state. If the state number keeps drifting down while the metros hold, the gap is rural Texas and the sectors that depend on immigrant labor, and that is where the damage will show first.
• Houston's seller to buyer ratio turning. Not to balance, just turning. It is the single clearest signal that the housing correction in the state's largest metro has found its floor.
• Golden Pass trains two and three on schedule, and Corpus Christi Stage 3 complete. The export story is real but it is a construction story until the terminals are done, and construction in Texas right now is short of workers and paying tariff prices for steel.

Texas is not exposed to this crisis. Texas is the other side of it. That has been true of every energy shock since 1973 and it is true now, and it cuts both ways: the state earns more from the world's shortage than any other place on earth, and it pays more for its own consumption than it did a year ago, and it is doing both while building more power demand than any grid in the country has ever had to absorb. Those are not contradictions. They are the job description.