Q3 2025 Energy Market Outlook: Texas Drives Record Global Oil Demand Amid AI Revolution and Geopolitical Shifts

Executive Summary

In this episode of The Road to Autonomy podcast, Grayson Brulte discusses the complex factors driving record global demand for oil and natural gas with Dean Foreman, Chief Economist, Texas Oil & Gas Association.

Grayson and Dean discuss the inverse relationship between the weakening US dollar and oil prices, noting how a weaker dollar makes oil cheaper for foreign buyers and supports demand. The conversation highlights the surge in natural gas consumption, fueled by emerging markets in Asia and the massive energy needs of AI data centers.

Finally, they examine the pivotal role of Texas and the Permian Basin as the primary engine of growth for US oil and natural gas production, underpinning both domestic and global energy markets.

Key The Road to Autonomy Episode Questions Answered

Key The Road to Autonomy Topics & Timestamps

[00:00] How the Weakening US Dollar Makes Oil Cheaper and Supports Global Demand

Because crude oil is priced globally in US dollars, a weaker dollar makes it cheaper for foreign buyers. This price advantage historically supports an increase in global oil demand and is considered one of the market’s clearest and most consistent drivers.

[00:56] Why Interest Rates Matter for Energy Capital Costs and the Strength of the Dollar

Interest rates directly impact the energy sector in two main ways: they shape the cost of capital for energy investments, and they influence the strength of the US dollar. If the Federal Reserve keeps rates higher for longer, it could suppress consumer spending; conversely, if the rate cycle turns, it could support growth in energy demand in the coming year.

[01:50] The Impact of Household Debt and Consumer Spending on Oil Demand

Consumer spending, which is tightly linked to oil demand for gasoline, diesel, and jet fuel, makes up 70% of the US economy. A significant concern is the record $18.4 trillion in household debt and rising delinquencies in credit card and student loan payments. This trend could have a compound effect, slowing consumer spending and subsequently reducing demand for oil.

[05:54] Global Natural Gas Demand Hits a Record, Driven by Emerging Markets in Asia

Global natural gas demand reached a record 148.7 trillion cubic feet in 2024 and is forecast to grow another 1.8% in 2025. Approximately 75% of this new growth is driven by emerging markets, particularly in Asia, where developing nations are seeking a cleaner energy source than coal for power generation and industrial use.

[06:53] Texas’s Outsized Role, Accounting for 30% of US Natural Gas and 43% of U.S. Oil

Texas is the powerhouse of the US energy industry, producing 30% of the nation’s marketed natural gas and 42-43% of its oil supply. The Permian Basin alone is responsible for 80% of recent US oil growth. This energy production has a massive economic impact on the state, supporting approximately 1.3 to 1.4 million jobs and generating $27.3 billion in taxes last year.

[09:50] The Rising Demand for Natural Gas to Power Energy-Intensive AI Data Centers

The expansion of AI, cloud computing, and other high-performance computing requires vast amounts of reliable, 24/7 electricity. To meet this need, data center operators are increasingly turning to co-located natural gas generation facilities as a cost-effective and easy-to-build power source, making natural gas a critical “bridge fuel” for the AI boom

[12:48] Global Oil Demand is Projected to Hit Three Consecutive Records Through 2026

The U.S. Energy Information Administration (EIA) forecasts that global oil demand will set new records for three consecutive years, reaching 103.7 million barrels per day in 2025 and 104.9 million in 2026. This growth is fueled not just by gasoline consumption but also by strong demand from industry, travel, and petrochemicals, with diesel up 4% and jet fuel up 5% year-over-year.

[18:29] How OPEC and Russia’s Supply Decisions Influence the Global Market Balance

Global oil supply, led by non-OPEC producers like the US, Brazil, and Guyana, is projected to grow faster than demand in 2025 and 2026. This puts pressure on OPEC and Russia to manage their output to maintain a balance between a healthy price and their strategic market share. Geopolitical events, such as a resolution to the conflict in Ukraine, could lead to Russia bringing more supply back to the market.

[21:49] Geopolitical Implications of the Proposed Power of Siberia 2 Pipeline Between Russia and China

A proposed Power of Siberia 2 pipeline could transport up to 5 billion cubic feet of natural gas per day from Russia to China. This volume is equivalent to roughly half of China’s current LNG imports, representing a potential “tectonic shift” in global gas markets that would diversify China’s supply and increase competition for other LNG exporters.

[25:21] The State of Natural Gas Storage in the U.S. and Europe Ahead of the Winter Heating Season

US natural gas inventories are in a strong position ahead of winter, sitting in the top 20% of the five-year average range. This has helped keep prices relatively low, around $3 per million BTU. The robust storage levels suggest the market can handle a modestly cold winter, but a colder-than-expected season could increase the global pull on US supplies.

[34:16] How Technology and Re-fracturing are Boosting Oil and Gas Output with Fewer Rigs

Productivity gains from technology and data analytics have been phenomenal for the oil and gas industry. The US is now producing about 20% more output with 40% fewer drilling rigs compared to 2018-2019 levels. Additionally, the ability to hydraulically “re-frack” existing wells is increasing recovery rates, ensuring the US shale revolution can continue for decades.

[37:49] Three Key Factors to Watch in the Market: Global Demand, OPEC+ Supply Discipline, and Inventories

Three critical factors to monitor are global demand, OPEC+ supply decisions, and inventory levels. Key questions include whether economic softness in the US and Europe will slow demand and how OPEC+ will manage production in a market where supply is expected to outgrow consumption. Furthermore, historically low commercial and strategic petroleum reserves in the US leave the market more sensitive to geopolitical disruptions.

Full Episode Transcript

Grayson Brulte: Dean, it’s great to have you back. It seems like just like yesterday, you and I were having coffee in Austin. It was hot, and now we’re, it’s September. We’re past Labor Day. Kids are back in school, and we’ve got a weakening US dollar. What impact is this weakening US dollar having on the oil market? 

Dean Foreman: Well, historically, oil and the dollar have almost moved. You know, inversely one-to-one, and that’s because crude is priced globally in US dollars. A weaker dollar makes oil cheaper for foreign buyers. And historically that’s supported demand. So right now the effect is re reinforcing strong fundamentals. Economic growth has continued. We’ve got record global demand, relatively low inventories. You know that relationships, it’s not perfect, but it’s one of the clearest, most consistent drivers that we’ve gotten.

Grayson Brulte: Then there’s the, the other thing that’s going on. You can’t turn on the news without hearing interest rates. Interest rates. Interest rates. There’s this side of the interest rate debate, that side of the interest rate debate. How closely do we need to be watching interest rates as it relates to the oil market? 

Dean Foreman: Pretty closely. Interest rates matter for a couple of reasons. First, they shape the cost of capital for energy products for broader capital investment. Second, you know, they really influence the strength of the US dollar. We’ve gone through a period where other countries around the world have been cutting rates and the US has been holding pat and. That could change. If the Fed keeps rates higher for longer, that could weigh on equities and consumer spending as well. So if the rate cycle has truly peaked and starting to turn here, that could be supportive of growth and energy demand in the next year.

Grayson Brulte: Where’s the growth gonna come? ’cause we had the, the A TP revision that came out where unfortunately individuals are losing their job at larger numbers than was first reported. If they’re losing their jobs, where’s the demand gonna come from? 

Dean Foreman: Well, it’s more supportive of the demand growth that’s continuing. You know, we have, you know, demographic shifts that are, that are coming, but despite that, we’ve seen consumption and household debt continue to expand. So that is 70% of the US economy on an expenditure basis is consumption and holding up consumption. Part of its wealth effect. Also, the fact that US equities have continued to reach record highs makes more affluent households, the top 20% that are driving consumer spending feel affluent and cons continue their spending patterns without really changing as a result of shifts that we’re seeing in the broader labor market.

Grayson Brulte: You touched on the Boogie Man household debt. It’s currently $18.4 trillion a record. That’s a large number, that’s a, it’s a trillion with a T, not, not B, with a billion. How concerned do we have to be with about that? 

Dean Foreman: it’s definitely a key concern. It’s something that we’re monitoring. It’s the reason we featured it in our quarterly outlook, you know, really over the last year as, as one of the prime things to watch. And it’s not just the level, the record, high level of debt, it’s the delinquencies, the serious ones of three months or more on credit cards in particular. Also student loans. We went from, you know, with the reassortment of, or payments on student loans the prior quarter, you know, entering this year, we saw almost instantly 9% of them become seriously delinquent this quarter, you know, for the second quarter and the New York Fed’s credit monitoring panel, latest data, almost 13%. So that’s a lot of young people that are seeing credit ratings potentially get damaged as a result of not being able to pay these, these loans. And that can have a compound effect through consumer spending that we need to watch. It’s a critical point.

Grayson Brulte: Compound effect, and it’s gonna stay with them for potentially decades. If that part of the consumer, the lower end consumer, the younger consumer begins to crack and consumer spending starts to slow down across the board. What impact does that have on the oil and natural gas market? 

Dean Foreman: Well, consumer spending is tightly linked to oil demand and we, we see it. Could hit gasoline, it could hit diesel fuel, jet fuel use in terms of just discretionary income that affects travel. So you know everything from commuting to freight to travel. Global demand growth, global growth has continues to remain strong because of emerging markets driving that growth. But there could be softer spots that we see in developed economies. US demand could eventually weigh on price, on prices, given the supply demand balance if it loosens so far. That’s not the case this year, but that’s what we’re watching for.

Grayson Brulte: Are you watching for any, I’ll use the term plight term hiccups in the global emerging markets of anything that could potentially bubble up to be a concern to you.

Dean Foreman: Always look carefully at China and what’s happening there in emerging markets in general as a result of shifts in trade policy, we’re also looking at shifts in supply chains and how that’s affecting the energy value chain.

Grayson Brulte: Do you see any impact potentially of what the US is trying to do as it relates to the movement of metals and how that could potentially have an impact at all from the traditional supply chains moving to more of the domestic supply chain? 

Dean Foreman: Well, metals could be a leading indicator of what’s happening with supply chains generally. It’s not something that I’m watching very carefully, but I just, I’m looking at where trade patterns in general are going and where energy trade patterns are shifting, and that does tend to affect the price and the business environment based on, you know, we’re looking at everything from what opex behavior is, where, where China and India are buying. That shifts patterns both for oil and for natural gas.

Grayson Brulte: I want to go into some of the numbers here in natural gas ’cause every quarter you publish is fantastic outlook and I want to highlight some of the numbers here and I, and I wanna start with natural gas and put that in into perspective here with numbers. You report that global natural gas demand reach a record 148.7 trillion cubic feet in 2024, and is it expected to rise another 1.8% in 2025 with roughly 75% of the growth coming from, you said it. Emerging markets, including Asia North America, is is, is poised to supply 85% of the incremental LNG capacity in 2025. LED by Drum roll Police, Texas and Gulf Coast projects. Wow.

Dean Foreman: So the question then in there is, you know, what’s driving the growth, right? And the combination really of a pull on the demand side and a push on the supply side. When we talk about demand, you know, emerging markets, especially Asia, you know, that’s your main growth driver and its power generation in its industrial use mainly that you see there. And they also, from an environmental perspective, want something cleaner than coal. So that continues to support demand with China, India, Southeast Asia in general, still urbanizing, industrializing, and natural gas is giving them a way to improve the air quality, the reliability. You know, lower carbon intensity compared with using coal. But then on the supply side, especially led by Texas, we’ve got the geology of the infrastructure and now the policy environment that’s really, you know, supporting continued delivery. And we’ve thought about the share revolution historically as this, you know, burst of abundant cost-effective energy, both on the oil and the natural gas side. Natural gas liquids that get extracted from the natural gas stream are quietly a major liquid supply source that’s been hitting records again, this year of over 7 million barrels per day of NGLs coming out of the US 4.1 recently, a record high outta Texas. So that’s a milestone that quietly is really worth watching and it’s important to petrochemical markets. Texas alone now is accounting for about 30% of US marketed natural gas. That’s as of July, and 42 to 43% of US oil supply. So it really is the powerhouse led by the Permian Basin in Texas. The Permian Basin also on the New Mexico side, just continues to hit on all cylinders.

Gr Grayson Brulte: 30% natural gas, 42% oil. Tho those are impressive. But I gotta put the growth hat on here. Uh, will we continue? Are you projecting that to continue to grow? 

Dean Foreman: Well, it sure looks like it because that’s where the infrastructure has been. Most enabling of growth. The geology is favorable, it’s cost effective, and it, it’s where it’s possible. So you’re seeing the most M and a activity, mergers and acquisitions within the industry. The best of technology getting with the experimentation first in the Permian Basin, it really is the premier growth source, and if we’re looking across the US in general. The amount of growth, 80% of US oil growth this last year or year to date compared to the same, you know, first seven, eight months of the year last year, 80% of that growth is outta the Permian Basin.

Grayson Brulte: With all that growth, I’m assuming that’s having a positive economic impact on Texas’ economy.

Dean Foreman: For sure and we’ll be updating by year end Our, we call it our Energy and Economics Impact Report, an annual assessment. The Texas Oil and Gas Association puts out last year we generated. It was supporting 1.3 to 1.4 million jobs. It was paying $27.3 billion worth of taxes from one industry in one state. That exceeds the entire state tax receipts of 34 different states. To put that in context, so it’s, it’s massive for Texas economy. It’s a pulse through all of the manufacturing value chain and trade. You add on top of that, the fact that we are now premier LNG export platform and even though LLNG out of Louisiana is still slightly greater than that in Texas in terms of just the existing terminals, uh, with new construction, that’ll change. But 60% of the gas that’s going out of Louisiana is coming from Texas and New Mexico. So it really is important to see that that flowing, that entire value chain, continuing diversion.

Grayson Brulte: It’s an economic growth engine. I mean, that’s the way that, that I look at it. And last time you were on last quarter, we spoke about the growth of natural gas as it relates to data centers. And I went and did some work. I spoke to elected members of Congress, I spoke to large data center operators and there was a consistency. We love natural gas. We we need natural gas because we need to power these data centers. Because of how much energy it takes to power the AI that we use every day. In speaking with these, these large hyperscalers, these individuals operating these data centers, it seems to me they can’t get enough energy. They’ll take everything they can get do. We continue to see over the, over the next quarter and a lot of natural gas going to power these AI data centers.

Dean Foreman: Absolutely. But let’s be clear, today’s natural gas growth, you know, as we look out the window, it’s mainly about industrial demand and international demand for it. So as Asia takes more natural gas as Europe shifts away from from Russian gas, that pool for LNG exports has overwhelmingly been the demand source that’s grown the most in the United States. But then we look forward in the build out of AI and the need to co-locate a power source to go with the build out of of it. It’s cloud computing. It’s high performance computing it, it’s commuting computing, it’s generative ai. It’s all of those things that need 24 7 electricity demand and the most cost effective, easy to build way of getting that is to co-locate natural gas generation to go with it. So natural gas continues to be a bridge fuel as we’re ramping up and really just on the front end of the data center growth.

Grayson Brulte: Is colo, is that a common practice or is that a new emerging practice as relates to.

Dean Foreman: For large industrial facilities, it’s definitely something that’s existed for a very long time. I think given their choice, you really want utility scale generation where you can get it. So if a grid from Pennsylvania to Ohio, to Northern Virginia, to Texas, if they’ve got extra power that’s available and it’s cost effective and consistent, that that’s attracting hyperscalers. There are other considerations, fiber, connectivity, workforce, what have you, and, and the business environment in general. Texas has been very attractive across all of those elements and areas where it has spare power, you know, from, from a utility. They’re getting connections. And in a real estate play that’s really growing up where you’re seeing people develop sites, attract the hyperscalers and kind of, you know, meeting of the minds bring that together. But for many of them that wanna drive it themselves, they really are looking at, you know, a backlog now of orders for natural gas generators, the, the actual turbines and you know, whether you’re putting in combined cycle turbines aeroderivative units or s reciprocating turbines, depending upon what you want, whether it’s on the scale 24 7 or just peaking to offset what you otherwise, uh, you know, get an intermittency from other sources. That ends up being a cost effective way of trying to build it out relatively quickly without waiting for, uh, a utility to have the permission and the ability to build out the grid further.

Grayson Brulte: We’ve documented on the road to autonomy. Many times the utility build out could take years. We don’t have to go into specifics today, but it’s very clear. The natural gas market’s growing AI data centers is one part of it. Emerging markets is a large part of it, but it’s not just natural gas that’s growing the oil markets is continuing to grow and showing some pretty incredible resiliency. And I wanna highlight some numbers here, which you highlighted in in your report. The US Energy information, the August, 2025 update, they raised their global oil demand forecast again. That’s right. They raised it again. Now projecting three consecutive records, 103.7 million barrels per day in 2025, 104.9 million barrels per day in 2026. What’s driving this demand? ’cause every time I come on, every time you ever, every access go, let’s go way back here. Ever since the first time you came on, oils only continue to grow. And when you came on, oh, well it’s not gonna grow. But lo lo and behold, every quarter you’re on the same consistent story. It’s growing. What is driving this growth? 

Dean Foreman: So if there’s one benefit of the outlook process that I’ve used for years, and I’ve had these conversations with you each quarter, I think I take pride in the fact that we’ve been really spot on in terms of demand trends. And if you understand the economy built up by 200 economies around the world and really look at it by sector, it’s hard to get the demand side too wrong. ’cause that relationship, even through the pandemic, that relationship between economic growth and oil has been so strong. So look, right now we’ve got a mix of economic momentum and structural drivers that are leading to these consecutive record highs and. It’s often cast by analysts as an emerging market growth story, but developed economy softness, and let’s be clear, historically, in long run growth averages, like for the US or other developed economies, if it’s growing a little more than a half percent per year in developed economies usually that’s pretty strong. And this year, through the first eight months of the year, year on year and EIA data, we’re up almost 1% year on year, despite the fact that gasoline consumption’s slightly down. So again, this is really interesting, at least to me because diesel’s up 4% year on year. Jet fuels up 5% year on year so far this year. And petrochemical demand or feed stocks are up 3.6% year on year. So this mix, it shows oil demand growth coming from industry travel. Now, that’s every bit or more important than what’s happening at the gas pump.

Grayson Brulte: The diesel demand is interesting because the freight markets in, in a freight recession. Is that coming from global, from diesel demand? Is that United States? Let’s break that down a little.

Dean Foreman: Well, you have both an industrial side to it, a manufacturing side to it, as well as, uh, we just touched on data centers, but you know, sometimes the data center’s gonna put in a diesel generator, not just a natural gas generator. So that’s also helping boost it where you need short-term power solutions. You can get that from diesel.

Grayson Brulte: It seems that a lot of roads, not all roads, it seems a lot of roads go back to the, these data centers at the end of the day.

Dean Foreman: It’s definitely got multiple touchpoints and it’s a source of generational investment. I mean, the, this, I hope it’s not the.com bubble that that we had at the turn of the century, but we are definitely seeing a lot of productivity. That’s, you know, really just on the front end of it, the potential is tremendous. But from a state perspective like Texas, you know, we’re looking at it as not quite zero sum, but we’re definitely competing with other states for data centers and trying to attract a generational change in the infrastructure that goes with.

Grayson Brulte: There’s something that your state has that a lot of states don’t have. You have one of the best regulatory environments in the United States to attract businesses, and most importantly, governor Abbott would love to hear this. Keep businesses in Texas, you have a great regulatory en environment for that. ’cause you have the energy you, you have the land, you have the skilled workforce, you have the, the right infrastructure, you have the right tax environment. You have all these really great ingredients as we’ve seen with the growth of Texas, which has been well publicly documented there. So the is is what you and I both know every quarter you come on the oil markets are growing, but you and I have these great conversations around EE economics and what potentially could happen. And when I look at the market, I see the potential. I’m not saying definitely I see potential, potential weakening in the economy. If that happens, does oil still continue to grow and if, if so, is that offset by the global demand? 

Dean Foreman: Well, the global picture has remained solid to this point, and you know, we’re looking at leading indicators to see if we see turning points in that. In the US there’s definitely a soft patch in the data that we’re seeing and, and we’ve highlighted some of these in our weekly, monthly, and quarterly reports. The a DS index from Philadelphia Fed being a prime one that, you know, kind of shows stall speed as of this quarter. In terms of oil demand, though, this is, given the global backdrop, this is more of a leveling off in the growth as opposed to, you know, a structural drop. And keep in mind, during the depths of the pandemic, in the worst quarter, in the worst quarter, where you’re shutting down travel in parts of the economy, the world still needed over 80% of its normal demand just to make, make things run. So that intrinsic relationship of what keeps it going is there. And from a growth prospect, again, just highlighting the US statistics so far this year, the fact that petroleum demands up almost 1% year on year in the us this, this is underpinning why we’re continuing as the economy, even if it goes more slowly, it’s still looking at growth for the oil market.

Grayson Brulte: Is it fair to say that oil petroleum is, is a key component of the global economy? 

Dean Foreman: Absolutely. Fund foundational, so. The transformation of energy markets in general, the fact that transportation systems, over 90% of the energy still comes from liquid supplies. Oil really is what makes it go and it’s it’s unique energy density that helps enable that.

Grayson Brulte: and let’s go to the supply side here of oil ’cause you, you have some really interesting data. The EIA is projecting that global production growth is projected to exceed demand in 2025 and 2026. Here’s the interesting part in this report, led by non OPEC producers such as the US drill, baby drill, with additional contributions expected from OPEC In Russia, I saw Russia and they said, wow, we don’t have a ceasefire yet. We don’t have an agreement. How’s this oil gonna come onto the market? 

Dean Foreman: This is one of the key points to, you know, for a listener to really take into account. We’ve got mediocre economic growth, right? Not exactly booming. We have record oil demand and growing, but yet we still have relatively low or moderate prices for oil and a market that expects the world market to be a wash in oil. So part of this is the fact that you’ve got pent up supply, long lead conventional projects coming out of Guyana, Brazil, Norway, Canada, on top of continued US growth. That’s been healthy this year. And that’s fueled by productivity gains by the way, in the US that, that we can talk about in a sec. But then on the oex side, that keeps pressure on them to keep supply sufficient to, you know, ride this balance between a healthy price that’s compensatory for what they need for government spending and continuing to guard their strategic concerns over market share. Russia, having been hampered somewhat by sanctions in recent years has kind of helped the rest of OPEC kind of maintained that balance. But they had announced a few months ago, last quarter, we talked about their announcement of wanting to put 2.2 million barrels per day of new supply back on market over a period of 18 months. And they’ve put a sliver of that, you know, really seven, 800,000 barrels per day back on market. And the demand growth has enabled that, right? But they still have a lot of spare production capacity they could put more on. So read the tea leaves. Now on what happens geopolitically with Russia, Ukraine, if you see a peaceful resolution that opens the spigot for Russia to put more back on market to continue to position for growth, to reclaim some of the markets where it’s seeded share over the last several years. Uh, if we see that protracted, and this is actually part of what in recent weeks has helped support oil, is that we’ve shifted from a market perception that there would be a resolution to saying it looks more protracted, like it might, could continue. And if that continues indefinitely, then you know, Saudi Arabia plays a more prominent role in maybe continuing to increase supply. Other others of the OPEC syndicate have kind of found it difficult to meet their quotas, so it, it really is about what happens with Saudi Arabia and Russia. That’s pivotally important to markets here.

Grayson Brulte: But there’s a country didn’t mention yet that’s out there. President Putin’s there publicly been documented this week. China. Where and when does China come into the picture? I ask that purely from their buying power perspective. Then I also ask that from a geography perspective, the where they’re located as it relates to Russia.

Dean Foreman: Well, there’s an oil side and a gas side to this in terms of oil growth. You know, China and developing Asia is still your prime demand source, and they’ve been quietly willing to take a lot of oil directly from Russia. India as well. Turkey, you know, your third source. That’s where the majority of Russian oil gets placed. As long as their demand growth and their economy are continuing, you know that that holds together and it’s a global commodity globally traded that’s continuing to grow from a natural gas side. This week it was really interesting that the meetings in China resulted in a proposal for a Power of Siberia, two pipeline that could have capacity in the next decade of up to 5 billion cubic feet per day. To put that in that context, that volume from that secondary pipeline expansion is equivalent to about half of what LNG is, is imported into China today. So if you’re looking for tectonic shifts in global natural gas markets, it won’t happen overnight. You’ll see it a mile coming, but that could really diversify and create more competition for supply sources into China.

Grayson Brulte: If you look at the numbers that you so elegantly put out there with the Siberia tube pipeline, to me, that has a lot of geopolitical ramifications involved with that. Does this bubble to the point where we, where we start seeing this diplomatic channels, we start seeing this start to come up in more of a, the mainstream news. A look, look, look what China’s trying to do here from just from a pure energy. If you want standpoint.

Dean Foreman: Well, I, I think it’s a continuation of an ongoing plot for China and the theme continuing to be diversify sources of supply. It’s way of them managing their economic and supply security to go with it. So it’s not new, but the tensions that we’ve seen elevated geopolitically have kind of forced the economies in Asia, Russia, you know, that access to kind of work together more than they otherwise might have. It is important that in global gas markets in particular, particular with Asia Pacific being your historical source of supply growth, both the price linkage contractually, historically back to oil, that was one element, but security, supply and diversity of supplier are the other elements that really kind of make that work. And this is one of the questions is how will this market that is so important for the globalization of natural gas continue to grow if security supply can’t continue to be trusted. It’s really important, therefore that the rule of law, the continued expansion and growth of these export facilities and the pipelines to support them through the value chain, plus the continuation of the supply that we’re seeing out of the Permian Basin, Texas, the Gulf Coast in general, that’s continued to show strength and contractually, we’re seeing people continue to line up for it. So they’re good signs so far, but these are the risk factors that we’re looking at going forward.

Grayson Brulte: we’re not in sweater weather yet, but we’re, we’re, we’re getting there. At some point in Q3, we will be in sweater weather. When do you and I start to have the dialogue around either it’s gonna be a mild winter in Europe, it’s gonna be a cold winter. When does that conversation start to enter the picture? 

Dean Foreman: That’s a great question because it’s Northern Asia, it’s Europe, and it’s North America. You know, really is one conversation about what winter tends to look like. And natural gas markets have recently shifted back and forth in terms of sentiment on this. It’s gone from earlier this year, projecting prices to rise steadily in the futures where futures went from $4 up to $5 per million B two U by next winter. I mean, big increases and historically high that you know, when you’re above $4 per million B two U all day, you substitute coal for natural gas just on a, you know, per BTU basis based on relative prices. That’s where the crossover starts. So you would use aot less natural gas and domestic power if the, if those prices turned out. But in the last month or two, we’ve seen the inventories get historically high. We’re still sitting in the top 20% of the five year range in terms of domestic working gas and storage. So the fact that we’ve rebuilt those inventories so strongly is another sign that says, well, you know, maybe we can handle even a, a modestly cold winter as we go into it. So to the day we’re sitting around $3 per million B, two U slightly above it, we’ve gone plus or minus, you know, at the high twos, the low threes. That’s taken some of the air out of that trade. So if you follow our weekly chart book, by the way, we look at mean reversion. We look week to week and say, you know, is it above? Is it below? Based on what the historical target would say. And it really is historically based methodology. It’s not forecasting, you know, as a trade association, we try to stay away from that. But it’s interesting that that has been both for oil and natural gas markets, a really useful and consistent tool. And we’ve seen it now where the prices have for natural gas have come back into line with this historical range. And now, depending upon what happens here in the shoulder season for winter, we’re gonna read over the next few weeks whether people are expecting something historically cold and more of a global pool from the us or if there’s a warmer winter, you know, you could see prices depressed, it could go either way.

Grayson Brulte: When you stay, say, storage, is that natural gas stored in Europe? Is that natural gas stored in America for export? Where is that stored? 

Dean Foreman: Everybody has caverns in which they store natural gas. This isn’t usually aboveground tank storage. And these underground caverns, that store, uh, weak. We use the term working gas as opposed to the total volume of gas. ’cause working is what you can actually take out, you know, without completely depleting the system. And working gas is, is basically the flex of what you can, can work with. We’re seeing that you’ve, you’ve got it regionally across the US a lot in the Gulf Coast concentrated. You’ve got it in Europe, you have it in China too, and as that plays out, that gas storage, you know, you produce it year round, but you consume a lot during heating season. That industrial demand is kind of a base load demand for gas. But really that seasonal heating need from residential to commercial is really what creates the flex seasonally in terms of natural gas demand.

Grayson Brulte: In Europe, if we do go into and we, we hit the, the sweater weather, the jacket weather earlier than is expected. They start to dip into the gas supplies. Who steps in to supply the gas Europes needed and, and what kind of political malice are we going to enter if that is indeed the case.

Dean Foreman: Well, I mean, another great question because historically Europe would balance supplies from Russia, a large portion of domestic supply LNG coming in and then pipes from Northern Africa and with the continued globalization, LNG markets and trade with the sanctions on Russia and Europe explicitly shifting off of it and we’ve seen up to three quarters of Texas LNG exports going to Europe times this year, and it’s down a little bit in Asia’s stepping back up based on just relative demand. But this is always a very regional and seasonal market. It’s very price sensitive, again, with these crossovers, uh, via coal in particular, but in general versus other sources. And that is, it’s globalized in the sense that now our US storage for natural gas serves an increasingly global role, which means it can be drawn down further. But at the same time, we’re also on the supply side looking at saying we can produce it faster than we used to as well. So those dynamics, they compete against one another and net net here we are still with $3 per million, BTU gas, historically low with with globalization and with record high exports in recent months.

Grayson Brulte: A practical standpoint from the US is a lot of that energy, the natural gas, the the oil is that coming from the Permian Basin is, is that our growth engine here for exports? 

Dean Foreman: It’s a growth engine in general for natural gas and for oil. And in the Permian Basin you get a lot of natural gas associated with that. So if you’re looking at a share of the growth of natural gas, also coming from the Permian Basin in Texas, it would be high, but to support exports specifically, you also see the Haynesville dry natural gas area of East Texas and Louisiana supporting exports, both because of its convenient location and infrastructure right adjacent, basically to LNG exports. But the fact that it, it’s just the economic crossover. So when you build these $5 billion at a time, LNG, um, facilities or trains, you know, each one is gonna commit to either 700 million cubic feet per day, up to a billion cubic feet per day of incremental supply needs. You don’t just build that based on expecting to go to a liquid trading hub and draw that on a so-called spot basis that that wouldn’t justify multi-billion dollar investments. What you do is you have long-term contracting in place. In other countries, you would explicitly tie certain resources to those export facilities. It’s not so formal through the value chain here domestically, but effectively you do have long-term supply contracts in place that then support the development. You know, the supply is incrementally gonna come from either the Permian, the Eagleford, or the Haynesville or Appalachia, but it, it’s gonna come from somewhere with certainty to make sure that that facility can operate.

Grayson Brulte: Are you seeing any signs of continued investments in these facilities from an oil and natural gas brick? Are these companies continuing to invest? 

Dean Foreman: A hundred percent. Now, some of the uncertainty, we had two sources of uncertainty in recent years, and as recently as last year, uncertainty over the ability to expand and permit and build the the permit issue W was really considerable that, um with the new administration, that that has largely gotten much better. So you’ve seen green lighting of a lot of facilities moving forward, taking affirmative financial investment decisions. So across Texas, you know, we have, you know, really two operational facilities, a third coming online that’s in commissioning. And then we’ve got, if we’re exporting, you know, four to 5 billion cubic feet per day of LNG today from existing facilities and if we count some of the Louisiana facilities, it’s clo, it can be eight or more. We’re looking at adding another eight, basically doubling that within the next few years based on the facilities that have taken affirmative decisions that are under construction. So that’s not speculative, that’s coming and that’s a lot of natural gas production growth to support it. It’s pipeline growth to support it. It really is a huge economic boost and energy supply chain boost, that’s very likely to continue until the next decade as we need more and more natural gas.

Grayson Brulte: the demand’s there. But let’s get back to the economics here. ’cause on August 2nd in 2025, the a DS Business Conditions Index in the Philadelphia Fed was sharply revised downward, could that potentially slow down some investments or is the demand so high for this? They continue to invest.

Dean Foreman: For the reasons we talked about with data centers and a structural shift, I think the demand is, is baked in at a reasonably strong level. The a DS index, it’s kinda like an early warning system. Effectively, it’s a real time read on what GDP growth is likely to be for that quarter and it’s more timely for than the GD data themselves. So it’s basically saying right now that the third quarter is kind of at stall speed. That’s not a recession call, but it’s definitely a sign that the momentum that we’re seeing is fragile and that matters directly for energy demand.

Grayson Brulte: And the other big issue that at least this audience is, is very interested in. October 1st, the $7,500 EV tax credit goes away. You and I have spoken, I think it was a year ago, two years ago, that the amount of oil used for gas for cars is not as much as I originally thought until we became friends. Will that have any impact? 

Dean Foreman: Over time perhaps, but it, it’s not an instant impact. And keep in mind that ev sales is a segment of overall vehicle sales are still a sliver. So look, if that slows, I mean, directionally you’re saying more oil based fuels or petroleum based fuels as opposed to electrification and transport, but net net, you know, it, it won’t move the needle in terms of, of oil or natural gas at that point.

Grayson Brulte: with all the growth that’s coming from oil and natural gas, how much of that can be contributed to technologies that are letting, allowing companies to, to refract to, uh, optimized drilling, how much of that could be contributed to technology? 

Dean Foreman: Well, the comparison that if we go back to 2018 and 19, Texas and the US in general, were producing about a fifth more output with 40% fewer rigs. Think about that 20% more coming from with 40% less drilling activity that it’s phenomenal and it’s continued. And this is not ai, this is just, just more data analytics and analytical decision making, real time learning. Uh, as AI gets into it, it may continue that trend, and we talked touched on this last quarter, but the ability to go back and refrack to hydraulically refracture existing or mature wells increases the recovery factors with existing infrastructure even more so. There are a lot of sources of potential growth here that say the jail revolution in the US can continue for decades.

Grayson Brulte: Here’s a technology question. I know I’m gonna come outta left field and I’d love to get your opinion. At some point. I’m not asking for timeline, but at some point in the future, do we get humanoid robots in the oil field? At some point [ laugh] [ 

Dean Foreman: I dunno if, if you watch Landman, it doesn’t seem like anytime soon,

Grayson Brulte: landman was great and staying on the economic output here. What impact does Texas oil and natural gas industry have on the US economy? 

Dean Foreman: it really is pivotal. I mean, it’s core. If you think about it’s not just about the direct numbers. And when we talk about, you know, Texas Oil and gas, we, you know, we’re supporting about 1.3 million jobs, billions in value added, but it really is the effect of keeping fuels abundant and cost effective through the entire value chain. And the fact that the Permian Basin in Texas in particular is continue to supply the vast majority of the growth, it’s really important and it’s easy to look past, past that because you just see systemwide numbers, nationwide numbers that look great, but when you’re talking, you know, you know, if the US crude oil production is sitting at 13.4 million barrels per day and US natural gas liquids production, a little over 7 million barrels per day outta Texas, we’re talking 5.8 million barrels per day record highs, uh, of crude oil, plus another 4.1 million barrels per day of NGLs. So it, it’s, again, record amounts and growing is what we’ve continued to see from Texas. It is productivity driven. It really does by keeping everything affordable, the entire value chain, petrochemicals, manufacturing, both the direct and all the indirect and induced activity that comes out of it is consequential nationwide.

Grayson Brulte: I’ll say it my way. Texas Oil and natural gas industry is good for the US economy and has economic benefits. It’s a, it’s a job creator, Dean. Every quarter I learned a ton. This quarter was fun. We went all into, into geopolitics and, and, and what if, so we just look to Europe. We’re getting into weather, weather next quarter when you’re back on those folks up north. They’re gonna be in jacket weather. We’re in Florida, we’re still in shorts, weather. What do we need to look for in the oil and gas markets over the next quarter? 

Dean Foreman: I think it really three things to watch, you know, first global demand. You know, we’ve, we’ve talked about the record consumption growing both for oil and gas. Need to watch that. We need to see if any of the economic softness in the US or Europe starts to undercut some of that momentum and whether Asia Pacific in particular kind of stays on par right now. Looks good. Second, supply discipline, we’ve talked about Russia and OPEC and the importance there. So EI is projecting supply to grow faster than this record demand this, and again, next year. So a lot hinges on what OPEC plus’s policy actually is, and if they loosen, that could be pressure on prices, it’s really important to watch. And third are inventories and geopolitics. So US commercial stocks, we didn’t really touch on the inventory levels of crude oil in the US but both the commercial inventories and the strategic petroleum reserve are still low by historical standards. So that leaves markets relatively more sensitive to potential disruptions and whether we’re talking about sanctions enforcement on Russia, tensions in the Middle East storm season coming through, you know, the Gulf Coast. We need to watch those three things.

Grayson Brulte: You highlighted something we gotta touch on before we go here. The SPR read the Financial Times every day. You don’t hear a lot about it. You’re not hearing it. About two years ago, year and a half ago, you couldn’t turn on the the Financial News Network without going an hour about hearing about the SPR are, is it slowly getting refilled? Is it sitting at low levels? Where are we with the SPR? 

Dean Foreman: It’s slowly getting refilled, but it’s sitting just north of 400 million barrels. So look, it was sold off, about half of it was sold off in 2022. It’s not going to cover an extended period, an extended disruption. That said, we just went through some historically disruptive Middle East politics. Uh, the attack on Iran, everything that happened with, uh, Israel, and despite these Middle East geopolitics being really elevated, we didn’t see a big escalation. There was some, but that price premium seemed to come back out of the markets as a result of this getting resolved, and we made it through. So the fact that the US supply and Texas productivity, everything that we’ve been talking about in these other, aspects has been so strong. The timeless has improved. That has increased market confidence that we can step up and deliver in short order if there is a need.

Grayson Brulte: Well, I gotta study up on the SPR because next quarter we’re diving into the SPR, and that’s how we’re gonna start it. Unless there’s a major movement in the oil markets. And then we’re starting there. The future’s bright, the future autonomous, the future is oil and natural gas. Dean, I love having you on every quarter and to every, our listeners will given me they have really great feedback and to the trucking community. Thanks for your great feedback. Dean and I talked about it before we recorded today. We will start including more diesel commentary. So thanks for the great feedback and Dean, I love having you on. Thank you so much as always.

Dean Foreman: Love it. Thanks.