PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

State Economic Growth: Oil and Natural Gas a Big Factor

By at 29 July, 2019, 8:09 am

by Raymond J. Keating-

As reported earlier this year, first quarter 2019 real GDP growth in the United States came in at a solid 3.1 percent rate. Looking at the latest report on GDP growth by state, released by the U.S. Bureau of Economic Analysis on July 25th, we see that real growth in the first quarter was positive in all 50 states – ranging from a high of 5.2 percent in West Virginia to a low of 1.2 percent in Hawaii.

West Virginia being tops in growth highlights a key point from this state GDP report as well as the previous report for the fourth quarter of last year. That is, mining – namely, oil and natural gas production – played a big role in determining the top growth states.

As noted in the BEA’s look at first quarter state real GDP:

“Mining for the nation increased 26.5 percent, after increasing 38.0 percent in the fourth quarter. This industry was the leading contributor to growth in several states, including the three fastest growing states of West Virginia, Texas, and New Mexico.”

For good measure, mining was a major growth factor for Alaska, which ranked sixth fastest in terms of growth; in North Dakota, eighth fastest; in Oklahoma, ninth fastest; and in Louisiana, tenth fastest growth. That is, in seven of the top 10 growth states in the first quarter, mining played a major part in those economic gains.

And in the previous state GDP report for the fourth quarter 2018, it also was pointed out: “Mining and wholesale trade were the leading contributors to the increase in real GDP in Texas, the fastest growing state.” And later: “Mining increased 38.0 percent nationally and contributed to growth in 49 states. In addition to Texas, this industry was the leading contributor to the increase in real GDP in Wyoming, Oklahoma, Alaska, and New Mexico—the second through fifth fastest growing states.”

Over the past decade-and-a-half, the U.S. has become the globe’s leading energy producer, and that energy transformation – led by entrepreneurs who have spurred innovation and efficiency forward – has been the most consistent industry contributor to U.S. economic growth over that period.

Here are a few observations from the U.S. Energy Information Administration’s latest Short-Term Energy Outlook:

•  “EIA expects U.S. crude oil production, which reached a record-high 11.0 million b/d in 2018, to average 12.4 million b/d in 2019 and 13.3 million b/d in 2020. If the domestic and global forecasts are realized, the United States would maintain its status as the world’s leading crude oil producer in both years.”

•  “Natural gas production has consistently reached new record-high levels in recent months… [E]ven though growth is expected to slow, EIA expects growth in natural gas production through the remainder of 2019, largely in response to improved drilling efficiency, year-over-year cost reductions, and higher associated gas production from oil-directed rigs.”

•  “The United States exported more natural gas than it imported in 2018 and the first half of 2019, with net exports during those periods averaging 2.0 Bcf/d and an estimated 3.9 Bcf/d, respectively. Rising LNG exports and pipeline exports have contributed to a shift in the United States’ status from a net importer to a net exporter of natural gas on an annual basis since 2017… EIA expects U.S. LNG exports to increase by 63% to 4.8 Bcf/d in 2019 and by 42% to 6.9 Bcf/d in 2020…”

The EIA also has noted that the U.S. ranks as the world’s top natural gas producer.

U.S. energy has been a good news economic story even during the tough economic times we’ve experienced since the dawn of the Great Recession, and it promises to continue to be a key growth contributor moving ahead.

_______

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

News and Media Releases