Energy and Small Business Positives in 2017 and 2018

By at 20 December, 2017, 8:52 am

by Raymond J. Keating-

The U.S. energy story has been strikingly positive for some dozen years, including in 2017, and that looks to continue in 2018. That’s good for small business.

This energy story has been particularly noteworthy given that this stretch covered the Great Recession and the subsequent poor recovery/expansion period.

Consider that U.S. crude oil production had steadily declined from the mid-1980s to 2008. But since late 2008, crude oil production has risen markedly, even when factoring in a dip in 2016. For example, in mid-September 2008, production had moved below 4 million barrels per day. That rose to 9.61 million barrels per day in early June 2015, and after dropping to about 8.4 million in July 2016, production subsequently climbed, reaching 9.78 million barrels per day in early December 2017. So, in the case of crude oil, in less than a decade, U.S. production has increased by some 150 percent.

As for natural gas, after some growth in the late 1990s and very early 2000s, marketed production declined running into 2005. Then substantial growth kicked in, with production increasing from 1.4 trillion cubic feet in September 2005 to 2.4 trillion in September 2017. That’s growth topping 70 percent. It’s also worth noting that after a decline in 2016, growth resumed in 2017, particularly during the third quarter.

This transformation has been driven by technological advancements and innovations in tools like hydraulic fracturing and horizontal drilling. Vast oil and natural gas resources previously locked away have been opened up due to these developments. And these changes came about thanks to private-sector entrepreneurs, businesses, workers and investors.

Looking ahead, one recent report from the San Antonio-Express News noted: “Oil companies expect to spend billions more next year on drilling wells and pumping oil across the United States, a financial boost for firms that sell tools and equipment, farm out crews for rigs and fracking fleets and employ thousands across Texas. A survey released Wednesday of more than 300 oil companies indicates the industry plans to boost U.S. oil field spending — the lifeblood of local oil field services companies — by 15 percent in 2018 to more than $100 billion. If oil prices stay high enough to support those investments next year, it would mark the second year in a row in which U.S. drillers led a global spending hike as crude prices recover from the market’s collapse in 2014. Companies lifted U.S. spending 49 percent in 2017, according to the survey by New York investment bank Evercore ISI.”

For good measure, U.S. oil exports have been on the rise. As noted by Argus Media, “While total US crude export volumes have nearly doubled this year, volumes coming out of Texas have almost tripled.  The Texas loading area ramped up its export of crude oil by 186pc for the first 10 months of this year over the same period in 2016, said BIMCO. Total US crude exports in the time period rose by 90pc to about 900,000 b/d, according to data from the US Energy Administration (EIA). The increase in exports has come amid plentiful light crude supply in the Gulf coast and a shift in Chinese buying trends away from producers in the Middle East toward those in the Atlantic basin, including the US.”

And as Reuters reported, “The United States is on track to deliver up to 80 percent of the world’s oil production gains through 2025, the International Energy Agency estimates, increases fueled in part by easy access to capital.”

The experience so far in 2017 and expectations for 2018 point to growth on the natural gas front as well. Platts reported: “With ample natural gas supplies continuing to come from the Marcellus and Utica shale plays, significant gains in production are expected between 2017 and 2018, offering some price pressure at a time when other factors are poised to push prices up, the US Energy Information Administration said Tuesday in its monthly outlook. US gas production is forecast to rise in both 2017 and 2018 after declining during 2016, the first annual decline since 2005.” US natural gas marketed production is expected to grow by 8.5 percent in 2018, after estimated growth of 1.3 percent in 2016.

On the exports front, as reported by the U.S. Energy Information Administration, through the first nine months of 2017, total natural gas exports grew by 37 percent over the same period last year, and that followed on 28 percent growth during the first nine months of 2016 versus 2015.

Keep in mind when looking at these positive developments in the oil and natural gas arenas that these energy sectors are overwhelmingly populated by small businesses. Consider that according to the latest data from the U.S. Census Bureau (2015)

-89.6% of employer firms among oil and gas extraction businesses have less than 20 employees;

-77.3% of employer firms among drilling oil and gas wells businesses have less than 20 workers;

-80.7% of employer firms among support activities for oil and gas operations businesses have less than 20 employees,

-58.2% of employer firms among oil and gas pipeline and related structures construction businesses have less than 20 workers,

-and 51.5% of employer firms among oil and gas field machinery and equipment manufacturing businesses have less than 20 employees.

For good measure, major tax relief and continued work regarding much-needed deregulation serve as additional positives looking ahead for entrepreneurs, small businesses, and consumers when it comes to the energy sector.


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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