PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The U.S. Recovery in Oil and Natural Gas Production

By 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.

 

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