National Small Business Week: 4 Big Points on Energy Exports and Small Business

By at 8 May, 2015, 3:27 pm

Asia LNG Tanker

The misconception persists among much of the public that the energy business is all about big business. But nothing could be farther from the truth.

During National Small Business Week, it must be noted that the reality is that key energy industries are overwhelmingly about small businesses.

Consider the percent of U.S. employer firms in key energy sectors that have less than 20 workers: 90.7% among oil and gas extraction businesses; 78.1% among drilling oil and gas wells businesses; 81.5% among support activities for oil and gas operations businesses; 60.5% among oil and gas pipeline and related structures construction businesses; and 54.7% among oil and gas field machinery and equipment manufacturing businesses. That’s small business.

Of course, over the past near-decade, oil and natural gas has been a bright spot in an otherwise poor economy. As noted in SBE Council’s study titled Benefits of Natural Gas Production and Exports for U.S. Small Businesses: Nationally and Key States, while the U.S. economy has performed poorly in terms of economic, employment and business growth, growth has been robust in oil and natural gas industries thanks for private investment that has led to technological advancements in such areas as horizontal drilling and hydraulic fracturing. The result has been to transform the U.S. into the globe’s largest producer of oil and natural gas.

A new study from the National Bureau of Economic Research estimates significant benefits to the U.S. economy from innovations in hydraulic fracturing and horizontal drilling innovations in terms of added GDP and jobs.

Greater opportunities for economic, employment and business growth exist in the international marketplace. But changes in U.S. policies are needed to allow U.S. small businesses and workers to capitalize on international opportunities – namely, restrictions on crude oils exports, imposed back in the 1970s, must be removed, and the process for approving LNG export facilities must be accelerated.

Consider 4 big points on energy exports.

Energy Exports and Small Business #1: Big Opportunities for LNG Exports

The EIA estimates that the U.S. could become a net natural gas exporter by 2017, and annual exports could reach as high as 10.3 trillion cubic feet of LNG by 2040.

Energy Exports and Small Business #2: Big Opportunities for Oil Exports

API notes that “America has steadily increased its crude oil production over the past decade, and in 2015, the country is projected to produce over 85 percent more crude oil than it did in 2008.” Looking ahead, “Domestic crude production is still projected to increase over the next several years with or without export restrictions. However, if export restrictions are lifted, U.S. crude production is expected to grow faster, by an additional 110,000 to 500,000 bpd by 2020.”

Energy Exports and Small Business #3: Big Economic Gains from Lifting Oil Export Restrictions

Increased crude oil production for export purposes obviously is an economic positive, and those plusses are felt throughout much of the economy. For example, a recent Aspen Institute study estimated that lifting the oil exports ban would generate significant additional growth and jobs in the overall economy, including in manufacturing sectors, and a recent NERA study for the Brookings Institution reported, “The U.S. economy will benefit and benefits are widespread,” with consumers gaining from “higher real incomes and lower energy costs.”

Energy Exports and Small Business #4: Big Economic Gains from LNG Exports

Positive economic benefits for the U.S. due to enhanced natural gas production for export purposes, again, are clear. In fact, study after study confirms this basic tenet of economics. Margo Thorning, chief economist for the American Council for Capital Formation, accurately concluded that “the preponderance of the economic analyses of the impact exports of LNG from the U.S. show positive overall benefits in terms of jobs, investment and GDP growth. In addition, the impact on U.S. domestic natural gas prices rises will be relatively small, thus allowing U.S. customers to maintain a strong competitive advantage over our trading partners.”

Keep in mind that future estimates of energy production regularly wind up to underestimate what eventually occurs given the improvements that occur in technology – as we’ve seen in recent years with oil and natural gas production.

The enhanced opportunities and benefits generated from reducing governmental barriers to energy exports overwhelmingly will be achieved by the small businesses that work in and serve the energy industry, along with the small businesses who benefit as consumers of energy, including small manufacturers. All of this must be highlighted during National Small Business Week.

Raymond J. Keating, Chief Economist


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