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McCOMBS’ ENERGY-FOCUSED BUSINESS DEGREE PROGRAMS
The new Kay Bailey Hutchison Center for Energy, Law, and Business at The University of Texas at Austin, fosters collaboration across disciplines and allows students to draw on expertise across various schools, all with the goal of better preparing those who want to enter the energy field. The center sponsors research, hosts conferences of international energy experts, and encourages collaboration by developing interdisciplinary curricula. The center also is hosting a new journalist-in-residence program with Wall Street Journal reporter Russell Gold blogging weekly about key energy topics.
Former U.S. Senator Kay Bailey Hutchison, JD ’67, and president of the Texas Exes, spoke in February about the importance of the new center.
WHAT DO YOU HOPE THE KBH CENTER WILL ACCOMPLISH?
“The first opportunity will be to further encourage and support research that is truly cross-disciplinary, bringing together the best thinking in law, public policy, business, and engineering. So academic research is a big priority.”
HOW DO YOU VIEW UT’S ROLE AS A LEADER IN ENERGY EDUCATION?
“The university is breaking new ground in energy leadership, and it’s clear that we should have a center for energy in business and law. We are the flagship university with innovative energy research and energy specific curriculum, and you would expect all of these offerings to be at The University of Texas.I am very excited about it, and I think that we have an opportunity to be the place where anyone who wants to know how to manage energy production or manage an energy company will know they need to go to The University of Texas.”
HOW DO YOU SEE McCOMBS’ ROLE IN THE KBH CENTER?
“I don’t think anybody would question that we have the strongest energy reputation in the business school as well as the law school. Our professors have written the textbooks on the subject. So it’s a wonderful synergism between McCombs and UT Law, with the added component that energy and Latin America are so crucial in today’s world.” — David Wenger LATE LAST YEAR, oil prices fell from one of their highest points ever — around $100 per barrel — to less than half that in the space of a few months. The future began looking less sunny for companies that had invested billions in drilling and fracking.
The oil industry breathed a collective sigh of relief when crude prices began rising again early this year, but as August’s price drop can attest, the road to recovery is unsteady. McCombs researchers Jim Dyer and Joe Hahn recently published a study in Energy Economics that projects it will be several years before we see the price per barrel back up in the $100 range, but it’s a realistic long-term view.
Their “cone of uncertainty” forecast tool is a remarkably accurate hybrid of two models — one typically used for valuing assets in the financial markets, and the other the fundamentals of oil supply and demand.
“The picture looks pretty stable,” explains Hahn. “The industry is robust enough that new graduates with this kind of specialized knowledge will still see doors opening to them.”
Rob Jones, BBA ’80, MBA ’86, is on the board of directors of Shell Midstream Partners, LP. He says that even in periods of contraction, energy companies focus on the long-term. “In my experience, they consistently invest in talent, notably developing their next generation of commercial and technical leaders.”
“UT is a great resource for these companies. Our graduates have invaluable knowledge about oil and gas exploration and energy policy, finance and supply chain management.”
Energy markets have always fluctuated, but Ehud I. Ronn, McCombs professor of finance, whose research focuses on the valuation of energy commodity-contingent securities, says the question is how to most effectively analyze those fluctuations.
“Currently, for example, the upward-sloping price curve we are experiencing is a clear manifestation of an especially weak oil market, an indicator that we can expect an eventual recovery to normalcy at higher prices,” he says.
“Our students learn about the signals energy markets convey and how to use them in making better hedging decisions and correct valuation assessments,” says Ronn, who teaches energy finance. In addition to mastering asset valuation and risk management, McCombs’ energy finance students also learn about fossil fuel exploration, production, and distribution, says John C. Butler, associate director of UT’s Kay Bailey Hutchison Center.“Taking courses outside the business school allows students to get deep expertise in hands-on energy disciplines — not just moving things up and down the supply chain, but why this pipe needs to be at this location at this time in the process,” says Butler.
ALONG WITH NATURAL GAS, wind and solar are the two fastest-growing energy sources in the U.S. Texas leads the nation in wind capacity and is ramping up its utility-scale solar: In 2014, the state saw a $252 million investment in solar, a 45 percent increase from the previous year.
When these technologies first emerged, many were skeptical that their costs could ever be competitive. “But now solar, in particular, has gotten very inexpensive,” says Spence. Wind needed the push from tax credits in the past to make it competitive, but now it is “very close to parity with other fuels,” says Spence. A U.S. Department of Energy report found that the cost of wind turbines has dropped between roughly 20 and 40 percent since 2008.
That means that the rapidly growing renewable energy industry needs more people who understand emerging technologies and how to manage businesses that are on the cutting edge in the field. McCombs’ CleanTech MBA
CLOCKWISE FROM LOWER LEFT: Associate Professor Joe Hahn studies oil prices over time; Finance Professor Ehud I. Ronn researches energy valuation; Professor Jim Dyer developed a “cone of uncertainty” forecast tool with Hahn; John C. Butler is associate director of the KBH Center; Professor David Spence is an expert in energy law; Professor Sheridan Titman says economic analysis is central to all energy disciplines.
offers students a unique education in alternative energy, including classes in wind energy law and climate change policy.
Understanding renewable energy sources is particularly essential now, when world leaders are preparing for a potential transition away from traditional fuels. In June, G7 leaders agreed to phase out fossil fuels by the end of the century. Shell joined five other European oil majors in calling for governments to implement a carbon emissions pricing system. No U.S. oil majors signed the letter, but President Barack Obama introduced a plan to cut carbon emissions in the U.S. by 30 percent by 2030.
If his new Clean Power Plan survives the years of legal challenges that are beginning now before the plan is even finalized, Spence says refineries could be targeted next. That would be years down the line, but these are the kinds of scenarios Spence speaks about in his classes to prepare students for long-term changes in the energy field.
At the same time they are learning from Spence, McCombs energy students take courses in other schools across the UT campus. They have access to geosciences professors who study reservoirs and engineering professors who are figuring out the best ways to tap those resources. They learn the basics of energy law from professors at one of the top law schools in the country and remain informed about global energy policy through the LBJ School.
Yet at the center of all this interdisciplinary knowledge, “economic analysis is the filter for all of it,” says Finance Professor Sheridan Titman. “Engineering and science are required to understand the physical characteristics of the project — and the law puts constraints on what can be done, where and when — but it’s economic analysis that links everything and examines the impact on the bottom line. That
McCombs offers an energy management program (which recently received formal accreditation from the American Association of Professional Landmen) for both business and non-business undergraduates, as well as a bachelor of business in finance with an energy concentration. The school’s energy-focused master’s degrees include a master of science in finance with an energy concentration, an MBA in finance with an energy concentration, a Cleantech MBA, and a three-year Dual Energy Earth Resources/MBA, a multidisciplinary dual degree program that spans the Jackson School of Geosciences, the Cockrell School of Engineering, the McCombs School of Business, and the LBJ School of Public Affairs.
ability to analyze an energy project’s viability from a business perspective is what we provide here at McCombs.”
Priscila Mosqueda, BA ’12 Journalism, covers energy, the environment, and crime in Texas and Mexico.
