Texas Electricity & Oil: A Symbiotic Power Play?

Texas stands alone when it comes to energy. As the only state with its own power grid — managed by the Electric Reliability Council of Texas (ERCOT) — the Lone Star State has unparalleled control over its electricity production and distribution. But what truly sets Texas apart is the coexistence and interplay of two energy titans: its massive oil and gas industry and its equally dominant electricity sector.

Texas is the nation’s top oil and natural gas producer, accounting for over 40% of U.S. crude oil production and nearly 25% of natural gas output, according to data from the U.S. Energy Information Administration. This matters to electricity users because natural gas isn’t just a heating fuel — it’s also the primary fuel source for generating electricity in Texas.

Gas-fired power plants, which make up more than 40% of the state’s generation capacity, play a crucial role in supplying electricity on demand. This makes the cost of natural gas a direct influencer of electricity prices in your area. When gas prices surge, so can your energy bill.

At the same time, Texas leads the nation in wind generation and is rapidly expanding its solar capabilities — a unique blend that reflects a complex, evolving relationship between traditional fossil fuels and renewable energy. And with ERCOT operating independently from the rest of the U.S. grid, Texas’s energy dynamics are not just influential — they’re self-contained and uniquely impactful.

The connection between oil, gas, and electricity isn’t just historical — it’s structural. And as we’ll explore in the next sections, this relationship has real consequences for everyday Texans looking to power their homes affordably and reliably.

How Oil & Gas Influence Electricity Rates in Texas

Electricity prices in Texas aren’t set by a single provider or authority. Instead, they’re determined by market forces — and one of the biggest influencers in that equation is the price of natural gas.

Since natural gas powers the majority of electricity generation in Texas, its price plays a central role in shaping the cost of wholesale electricity. In ERCOT’s competitive market structure, electricity is priced based on supply and demand in real time. When natural gas becomes more expensive, the cost to generate electricity rises, and that often trickles down into the retail electricity plans you see when shopping for a provider.

For example, if a heatwave causes spikes in air conditioning use, power plants must ramp up production — often relying on natural gas turbines to meet the surge in demand. If natural gas prices are already high, the additional demand can send wholesale electricity prices soaring. This market-driven mechanism means Texas electricity users are directly exposed to fluctuations in global fuel markets.

The winter of 2021 brought this issue into sharp focus. During Winter Storm Uri, natural gas supply lines froze, reducing the fuel available to power plants. As a result, electricity prices in some areas spiked to their maximum cap of $9,000 per megawatt-hour — a stark illustration of how tightly electricity pricing is linked to fuel availability.

According to the ERCOT Fact Sheet, natural gas consistently serves as both a baseload and a peaking power source, which means it’s used during normal demand and also during periods of high usage. That dual role makes it a cornerstone of the Texas grid — and a major factor in what shows up on your monthly bill.

Understanding this connection can help consumers make smarter choices — such as opting for fixed-rate plans that protect against fuel-related price volatility. In the next section, we’ll look at how oil and gas also affect something just as important as your rates: the reliability of your electricity.

Oil, Gas & Grid Reliability: A Two-Way Street

While natural gas is key to powering the Texas grid, it also plays a pivotal role in its stability — and vice versa. This two-way relationship means that when one side falters, the other can be affected as well.

Natural gas power plants are considered highly flexible and responsive, making them essential for maintaining grid stability. Unlike coal or nuclear plants, which take time to ramp up or down, gas plants can respond quickly to sudden changes in electricity demand. This makes them ideal for handling peak usage periods — like sweltering summer afternoons when air conditioners are running full blast across Texas.

But the reliability of these plants depends on the availability of fuel. If natural gas can’t be delivered when needed, power production drops — and outages or rolling blackouts become a real possibility.

We saw this interplay vividly during Winter Storm Uri in February 2021. As temperatures plunged, gas wellheads and pipelines froze, disrupting fuel supply to power plants. At the same time, some gas compressors — which help push the fuel through the pipelines — lost power because they weren’t designated as critical infrastructure by electric utilities. It created a dangerous feedback loop: power plants couldn’t get the gas they needed, and gas facilities couldn’t operate without electricity.

This incident highlighted the fragile interdependence of Texas’s electric and fuel systems. When one breaks, the other suffers — and consumers are left in the cold, quite literally.

Texas regulators and lawmakers have since introduced measures to weatherize infrastructure and coordinate emergency responses, but challenges remain. The lesson here is clear: while oil and gas strengthen the grid under normal conditions, they can also become points of failure if not properly managed and protected.

In the next section, we’ll explore the mutual benefits that arise from this relationship — as well as the shared risks that come with it.

Mutual Benefits & Shared Risks

The relationship between oil, gas, and electricity in Texas isn’t just functional — it’s deeply integrated, with both sectors feeding off each other's success. But that closeness can also mean shared vulnerabilities.

On the benefit side, the oil and gas industry provides a stable and abundant fuel source for electricity generation. Texas's vast natural gas reserves help keep local electricity production relatively affordable compared to states that rely on imported fuels. This domestic supply strengthens Texas's energy independence and gives it leverage in national energy markets.

The electricity sector, in turn, supports oil and gas operations. Drilling sites, refineries, and pipeline systems require massive amounts of energy to operate — and that demand helps stabilize the grid. Industrial consumption from the oil and gas sector creates a predictable baseline of electricity usage, which is helpful for planning and infrastructure development.

This synergy boosts economic development across the state. Jobs in both industries tend to cluster around the same regions — from the Permian Basin to the Gulf Coast — generating local tax revenue, employment opportunities, and investment in energy infrastructure.

But the relationship comes with risks. As we saw during Winter Storm Uri, disruptions in one sector can cascade into the other. If extreme weather, supply chain failures, or global fuel market shifts hit Texas, the ripple effects can be widespread — affecting everything from oil exports to residential electricity bills.

There’s also the matter of over-reliance. Depending too heavily on natural gas for electricity makes the system more sensitive to price spikes and supply shortages. And as climate change increases the frequency of extreme weather events, those risks become harder to ignore.

That’s where renewables — and diversification — come in. In the next section, we’ll look at how Texas is integrating wind and solar power to create a more resilient and balanced energy future.

Where Renewable Energy Fits In

Texas may be known for oil and gas, but it’s also a renewable energy powerhouse — and the balance is shifting faster than many people realize.

The state leads the nation in wind power production and ranks among the top for solar capacity. In fact, as of 2024, wind and solar combined generate over 30% of the electricity in Texas, according to the ERCOT Generation Resource Mix. That’s a massive share in a grid once dominated almost entirely by fossil fuels.

This growth is more than just a climate win — it’s an economic and strategic one. Wind and solar are free fuel sources, immune to the kind of price volatility that affects natural gas. That means as more renewables are integrated into the grid, there’s greater potential to reduce long-term electricity costs and insulate consumers from sudden fuel-related price spikes.

Renewables also shine in terms of scalability. Texas’s wide-open landscapes and sunny climate make it ideal for solar farms, while the breezy plains of West Texas are perfect for wind turbines. And because renewables don’t rely on fuel deliveries, they’re not as vulnerable to supply chain issues or pipeline disruptions during extreme weather events.

But renewables don’t exist in a vacuum. Wind and solar are intermittent by nature — they only produce electricity when the wind blows or the sun shines. That’s where natural gas still plays a key role, stepping in as a backup during periods of low renewable output. This complementary relationship helps create a hybrid grid that’s more resilient, flexible, and capable of meeting Texas’s growing electricity demands.

For consumers, this shift toward renewables brings more choice. Many electricity plans now offer 100% renewable energy options — often at prices competitive with traditional plans. In the final sections, we’ll explore how this evolving energy mix affects the types of plans available to you and how to choose one that aligns with your needs and values.

What Does This Mean for Your Electricity Plan?

Understanding the connection between Texas’s energy production and your electricity plan isn’t just interesting — it’s empowering. Whether prices are rising due to natural gas volatility or dropping thanks to increased renewable output, these shifts directly influence the offers available in the retail market.

If you're shopping for electricity in Texas, you've likely encountered a wide variety of plan types: fixed-rate, variable-rate, renewable, prepaid, and more. Knowing how oil and gas affect the grid helps you make better choices about which type of plan fits your needs.

Fixed-rate plans, for example, are a great option for protecting yourself from price spikes driven by natural gas fluctuations. These plans lock in your rate for the duration of your contract — typically 12, 24, or 36 months — shielding you from short-term market instability.

Renewable energy plans are another compelling option. As mentioned earlier, wind and solar are becoming more affordable and widely available in Texas. Choosing a renewable plan doesn’t just reduce your carbon footprint — it also helps stabilize demand and encourages investment in infrastructure that’s less vulnerable to fuel supply issues.

When reviewing any plan, always take the time to examine the Electricity Facts Label (EFL). This document breaks down key details like the plan’s energy source, rate structure, average usage costs, and contract terms. It’s your best tool for comparing plans side-by-side without getting caught off guard by hidden fees or unexpected rate changes.

Still unsure which plan to choose? That’s where we come in. Ladybug Energy offers a free and simple way to compare electricity plans from multiple providers — with transparent details, no surprise charges, and filters to find exactly what works for your household or small business.

Final Thoughts: Navigating Your Energy Choices in Texas

Texas sits at the crossroads of traditional and modern energy. The oil and gas industry continues to power much of the state’s infrastructure — but the rapid growth of renewables is reshaping how electricity is produced, priced, and consumed. For everyday Texans, this evolving energy landscape creates both challenges and opportunities.

On one hand, exposure to global fuel markets means your electricity rates can fluctuate based on oil and natural gas trends. On the other hand, increasing access to renewable energy plans gives you more control than ever before. And in Texas’s deregulated market, you’re not locked into a one-size-fits-all utility — you have the power to choose a plan that matches your priorities, whether that’s cost savings, price stability, or environmental impact.

So what’s the best move for Texas consumers right now?

• Educate yourself. Understanding how energy markets work gives you leverage when selecting a plan. Knowing the relationship between natural gas prices and your electricity rate helps you anticipate market trends.
• Compare before you commit. Rates, terms, and plan structures vary widely between providers. A side-by-side comparison tool makes the process faster, easier, and more transparent.
• Look beyond the price per kWh. Contract length, cancellation fees, renewable content, and usage tiers all affect your actual monthly bill.

The bottom line: your electricity plan is more than just a number on your utility bill — it's a reflection of the energy system powering your life. Whether you’re driven by cost savings, reliability, or sustainability, taking a thoughtful approach to your electricity choices can help you stay one step ahead in Texas’s dynamic energy market.

Need help finding a plan that fits your needs? Use our electricity plan search tool to start comparing now — and take control of your energy future with confidence.