The U.S. Recovery in Oil and Natural Gas Production
By SBE Council at 11 January, 2023, 5:51 pm
by Raymond J. Keating –
The recovery of the U.S. oil and natural gas sector has been a good news story amidst lingering pandemic economic woes, misguided and costly public policy decisions, recession realities and threats, and of course, Russia’s continuing egregious war against Ukraine. And small business plays a big part.
In the following chart, we see the long-term trend in U.S. crude oil production, including the long decline in output from 1970 to 2008, the subsequent dramatic reversal thanks to innovations in areas like hydraulic fracturing and horizontal drilling, and then the dramatic decline in output due to the pandemic. And amidst all kinds of challenges, U.S. crude oil production has climbed back notably, almost to where it was pre-pandemic.

A similar story has played out in terms of U.S. natural gas production. Again, we see the dramatic takeoff in U.S. production starting in the middle of the first decade of the twenty-first century, thanks to those aforementioned innovations. What’s even more impressive is that natural gas production recently surpassed its pre-pandemic levels.

As SBE Council often has pointed out, key energy sectors of our economy aren’t just about so-called “Big Oil,” but instead are overwhelmingly populated by smaller enterprises. Consider the following tables (2019 data latest from the U.S. Census Bureau, calculations by the author) showing that sector after sector on the energy front, including related manufacturers, is about small businesses.
Oil and Gas Extraction Sector
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
81.4%
|
Fewer than 20 employees
|
89.1%
|
Fewer than 100 employees
|
95.6%
|
Fewer than 500 employees
|
98.1%
|
Drilling Oil and Gas Wells
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
69.8%
|
Fewer than 20 employees
|
79.6%
|
Fewer than 100 employees
|
93.2%
|
Fewer than 500 employees
|
97.2%
|
Support Activities for Oil and Gas Operations
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
69.4%
|
Fewer than 20 employees
|
80.2%
|
Fewer than 100 employees
|
94.4%
|
Fewer than 500 employees
|
98.4%
|
Oil and Gas Pipeline and Related Structures Construction
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
42.7%
|
Fewer than 20 employees
|
56.7%
|
Fewer than 100 employees
|
83.4%
|
Fewer than 500 employees
|
94.2%
|
Oil and Gas Field Machinery and Equipment Manufacturing
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
40.4%
|
Fewer than 20 employees
|
55.5%
|
Fewer than 100 employees
|
80.2%
|
Fewer than 500 employees
|
89.8%
|
Pipeline Transportation of Crude Oil
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
38.6%
|
Fewer than 20 employees
|
47.0%
|
Fewer than 100 employees
|
55.4%
|
Fewer than 500 employees
|
59.0%
|
Pipeline Transportation of Natural Gas
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
39.3%
|
Fewer than 20 employees
|
49.6%
|
Fewer than 100 employees
|
58.1%
|
Fewer than 500 employees
|
64.1%
|
Pipeline Transportation of Refined Petroleum Products
|
Percent of Firms by Number of Employees
|
Fewer than 20 employees
|
43.6%
|
Fewer than 100 employees
|
49.3%
|
Fewer than 500 employees
|
54.9%
|
Gasoline Stations
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
80.1%
|
Fewer than 20 employees
|
93.3%
|
Fewer than 100 employees
|
98.6%
|
Fewer than 500 employees
|
99.6%
|
Petroleum Refiners
|
Percent of Firms by Number of Employees
|
Fewer than 20 employees
|
20.0%
|
Fewer than 100 employees
|
25.0%
|
Fewer than 500 employees
|
37.5%
|
Petroleum Lubricating Oil and Grease Manufacturing
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
37.9%
|
Fewer than 20 employees
|
52.5%
|
Fewer than 100 employees
|
74.6%
|
Fewer than 500 employees
|
86.3%
|
Petroleum and Petroleum Products Merchant Wholesalers
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
51.5%
|
Fewer than 20 employees
|
66.1%
|
Fewer than 100 employees
|
87.1%
|
Fewer than 500 employees
|
95.5%
|
Plastics Product Manufacturing
|
Percent of Firms by Number of Employees
|
Fewer than 10 employees
|
38.2%
|
Fewer than 20 employees
|
53.0%
|
Fewer than 100 employees
|
81.2%
|
Fewer than 500 employees
|
93.5%
|
Policies Must Promote U.S. Energy
Federal government hostility to U.S. oil and natural gas production, that is, hostility toward the entrepreneurs, small business, big businesses, investors and workers that operate in these sectors, never has made any sense. It’s been pure pandering politics winning out over sound economic policymaking.
Congress and the White House need to refocus energy policy so as to encourage U.S. energy production. That means, for example, opening federal lands and waters to exploration and production; rolling back excessive taxes and regulations rather than seeking to impose additional burdens; and streamlining the permitting and approval process for U.S. energy infrastructure (such as pipelines) and investments in production facilities.
These are the kinds of policy changes that will boost U.S. energy production and economic growth now and into the future.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.