PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

U.S. Energy: The Long Run Good News Story for Economy and Small Business

By at 12 June, 2019, 10:28 am

by Raymond J. Keating-

It’s no secret that the U.S. economy has not exactly been a juggernaut since the Great Recession – in fact, one can argue since the start of the current century. But throughout the last near-15 years, energy has been a good news economic story. And that continued into 2018, as noted by the U.S. Energy Information Administration. In fact, growth in 2018 on the energy front was quite robust.

Consider several points from the EIA:

● “The United States produced a record amount of energy from various sources in 2018, reaching 96 quadrillion British thermal units (quads), an 8% increase from 2017.”

● “In 2018, crude oil and natural gas accounted for 57% of all U.S. energy production, with crude oil production seeing an increase of 17% and natural gas an increase of 12% from 2017.”

● “U.S. energy exports increased 18% to a record high of 21 quads in 2018…”

● “Exports of crude oil and petroleum products made up 68% of all U.S. energy exports in 2018, accounting for most of the increase in total U.S. energy exports from 2017. Petroleum product exports reached a record-high 10.2 quads, or 5.6 million barrels per day. Crude oil exports nearly doubled and reached a record-high 4.2 quads (2 million barrels per day), surpassing both coal and natural gas on an energy equivalent basis to become the second-highest U.S. energy export. Exports of natural gas and biomass energy (e.g., ethanol) also reached new records in 2018, and coal exports reached its highest level since 2013.”

In terms of natural gas marketed production (million cubic feet), U.S. output increased by 73 percent from 2005 to 2018 (as noted in the following chart).

 

And U.S. crude oil production (thousand barrels per day) jumped by 87 percent from 2008 to 2018 (as noted in the following chart).

 

The U.S. economy slogged through a deep recession (from late 2007 to mid-2009) and a subsequent sluggish recovery/expansion period. Indeed, but for the period of 2003 to 2006, real economic growth has under-performed the post-World War II average since the start of this century, with annual real GDP growth averaging only 2.0 percent from 2001 to 2019 Q1 versus the post-war average of 3.2 percent.

But thanks to private investment and innovation (such as advancements in horizontal drilling and hydraulic fracturing), the U.S. energy sector has been transformed from assumed decline for as far as the eye could see into the globe’s leading energy producer.

And this very much has been a good news story for small businesses given the roles that small firms play in key energy sectors. Consider the small business share of employer firms in key oil and natural gas sectors (according to the U.S. Census Bureau (2016)):

● 89.5% of employer firms among oil and gas extraction businesses have fewer than 20 employees;

● 81.6% of employer firms among drilling oil and gas wells businesses have fewer than 20 workers;

● 83.4% of employer firms among support activities for oil and gas operations businesses have fewer than 20 employees;

● 60.6% of employer firms among oil and gas pipeline and related structures construction businesses have fewer than 20 workers;

● and 56.9% of employer firms among oil and gas field machinery and equipment manufacturing businesses have fewer than 20 employees.

The energy sector is an entrepreneurial, small business sector.

While the oil and natural gas industries have shown incredible resiliency over the past decade-and-a-half – through recession and under overt hostility from the Obama administration – public policy can provide a sound foundation upon which private investment and innovation can further thrive by rolling back burdensome and unnecessary regulations and restrictions (as has been begun under the Trump administration), reducing tax burdens (building on the 2017 business tax reform measure), and advancing free trade. Reduce governmental barriers and costs, and U.S. energy investment and production will continue to grow.

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

 

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