PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

It’s Energy Week! Unleash Energy, Unleash Small Business

By at 26 June, 2017, 6:45 pm

Major energy sectors in our economy are overwhelmingly populated by small businesses.

by Raymond J. Keating-

President Trump has identified the week of June 25th as an opportunity to focus on policies meant to unleash American energy. The Administration wants the U.S. to move from energy independence to global dominance. Make no mistake, unleashing American energy means unleashing American small business.

America’s Energy Renaissance 

It’s critical to reflect on the transformation that has occurred on the energy front in the U.S. over the past dozen years. Due to private-sector entrepreneurs, investment and innovation, advancements in assorted technologies, such as horizontal drilling and hydraulic fracturing, shifted the U.S. from a nation presumed to be dependent on foreign energy sources for the foreseeable future to the world’s leading energy producer. As the U.S. Energy Information Administration has reported, “U.S. petroleum and natural gas production first surpassed Russia in 2012, and the United States has been the world’s top producer of natural gas since 2011 and the world’s top producer of petroleum hydrocarbons since 2013.”

Consider that from 2005 to 2016, U.S. natural gas marketed production expanded by 49.7 percent. And from 2008 to 2016, U.S. crude oil production grew by 77.5 percent. That’s simply staggering.

A Bright Spot for Entrepreneurship: New Business Creation Increased in the Energy Sector

This energy revolution also has provided one of the few true bright spots in the U.S. economy in recent times. In general, U.S. investment has lagged (see this SBE Council analysis, for example) starting before the Great Recession and throughout the current poor recovery/expansion period. At the same time, entrepreneurship has suffered (as noted in this analysis). However, investment and business growth have been strong in key energy sectors. Just consider the growth in the number of employer firms in key energy sectors vs. an overall decline in the U.S. economy, as noted in Table 1.

Table 1: Growth in Employer Firms, 2005 to 2014: U.S. Total vs. Key Energy Sectors

Employer Firms in Key Sectors 2005 2014 Percent Change 05-14
Total (all sectors) 5,983,546 5,825,458 -2.64
Oil & gas extraction 6,317 6,646 5.21
Drilling oil & gas wells 1,833 2,121 15.71
Support activities for oil and gas operations 6,183 9,735 57.45
Oil and gas pipeline and related structures construction 1,612 1,839 14.08
Oil and gas field machinery and equipment manufacturing 480 599 24.79

Data Source: U.S. Census Bureau (2014 latest data available)

America’s Energy Success:  A Small Business Story

And make no mistake, this largely has been a small business story. As noted in Table 2, major energy sectors in our economy are overwhelmingly populated by small businesses:

Table 2: Percent of Small Businesses (Employer Firms) in Key Energy Sectors, 2014

Percent with Less Than 20 Employees Percent with Less Than 100 Employees
Oil & gas extraction 90.2 96.7
Drilling oil & gas wells 77.5 92.2
Support activities for oil and gas operations 80.7 95.2
Oil and gas pipeline and related structures construction 59.2 84.0
Oil and gas field machinery and equipment manufacturing 52.9 80.5

Data Source: U.S. Census Bureau (2014 latest data available)

Amazingly, much of this was accomplished during eight years of the Obama administration, a period of hostile policy toward carbon-based energy production and use.

When implemented, the energy agenda of the Trump administration and the current Congress of trimming and removing unnecessary and costly regulatory burdens, along with pro-growth tax relief and reform, will serve to increase incentives for further investment, entrepreneurship and innovation in energy.  That means more economic growth and quality jobs for Americans.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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