The University of Texas System Oil Revenue – What Lies Beneath

What would happen when a school struck oil? This “school” is not owned by the national or state government, but by a private entity. The University of Texas System has become the talk of the nation, thanks to its oil revenue, the lone star state university managed to closely follow the prestigious Harvard University in terms of income.

In 2022, the global market experienced a spike in oil prices, brought forth by the Russian invasion of Ukraine. Despite WTI oil futures almost returning to pre-war levels at $87.40 a barrel on 14 September, it still brings $6 million of revenue on a daily basis, roughly amounting to a total of $2 billion in 2022.

The Promised Land

The story of the University of Texas System actually predates the state’s admission to the union, without having oil in mind during its conception. According to the official website of the University Lands, which manages the vast land owned by the University of Texas System, President Lamar of the Republic of Texas first proposed the idea of establishing an education system. One year later, congress allocated 220,000 acres of land for a future university.

In 1883, the University of Texas at Austin was officially opened, and 1 million acres were added to the Permanent University Fund in the same year, to a total of over 1.2 million acres. Today, the University of Texas System holds 2.1 million acres of land, which is almost 8,500 square kilometers – roughly the size of Cyprus.

Windfall From Underground

Texas, as we know it today, is an oil-rich region. The allocated land is no different, 99 years ago, oil was discovered in Reagan County. Instead of building an oil business of its own, the University Lands allows oil and gas operating companies to lease the land while receiving a royalty interest. Various entities were created to manage and distribute the income generated, including oil, gas, minerals, crops, wines, etc.

Growing oil prices had brought massive wealth to the University Lands, the official figures claiming it is valued at $20 billion. The money is then funneled to the universities and health institutions within the network, for maintaining daily operations, development, and providing financial aid.

Conclusion

Although many other universities as facing cash crunches during the pandemic, the University of Texas System and its members benefitted from soaring commodity prices. It is noted that other universities, Harvard included, had investments in the oil and gas industry, but few matches the historical context of Texas.

The board in Texas also acknowledges how fickle oil bulls can be, and has been actively diversifying its portfolio in case of a sharp decline. As winter approaches and Ukraine’s counteroffensive just commenced, the University of Texas System is likely to enjoy a few more months of additional income. Check the latest oil price here.