WSP02890 - Laserfiche WebLink

Home Browse Search

farmers to stop pumping available ground water and return to dryland produc- tion or allow land to revert to grazing. Some subregions do show a brief decline in irrigation around 1990 because of the costs of pumping from the Ogallala. land is soon restored to irrigated production as productivity and real crop price increases expand the farmer's returns to land and management more rapidly than the energy price induced increase in the cost of pumping. When viewed from the perspective of the High Plains region as a whole, a more rapid rise in energy prices may expand the regional economy by an amount which more than offsets any decline in farm production or returns to land and management. This is particularly true in the southern three states of the Ogallala. In the Texas High Plains, the energy producing sectors have ex- panded from ten percent of the regional economy in 1970 to sixteen percent of a substantially larger economy in 1979. Despite an increase in produc- tion, agriculture fell from ten percent to six percent of the regional econ- omy in the same period. The rapid increase in domestic oil and gas prices since the 1974 Arab oil embargo accounts for this shift. Energy is likely to dominate the economy of the Southern High Plains through much of the study period, until recoverable reserves of oil and gas begin to play out. This occurs despite the use of energy price forecasts which some reviewers have called conservative. The energy sector analysis predicts that such exhaustion will occur toward the end of the study period, with a consequent decline in employment and royalty income in the oil and gas sector. To test the sensitivity of projections of farm production and returns to land and management, Black and Veatch developed a higher band of energy price increases for the purpose of sensitivity analysis. The energy prices used in the results reported in this analysis were projected to increase 0.4 percent per year after deregulation brings domestic oil and gas prices to world levels. The high band sensitivity analysis estimated real energy prices to increase at 2.530 percent per year after reaching the world price level. The high band sensitivity was selected to reach the highest level possible without altering the structure of the NIRAP model. Based upon experience of the last two years, such a sustained rate of increase would reduce economic growth and induce fuel switching and conservation to such an extent that this higher rate of real increase would very likely not be maintained throughout the Study period under any conditions. A-Z6