NEW STUDY: Oil, Natural Gas, Our Economy and Small Business

By SBE Council at 22 May, 2023, 2:44 pm

by Raymond J. Keating –

While the Biden White House and their allies in Congress actively work to undermine the oil and natural gas sector, such efforts effectively serve to undermine the U.S. economy and small businesses.

The American Petroleum Institute has just published a PWC study titled “Impacts of the Oil and Natural Gas Industry on the US Economy in 2021,” which attempts to quantify the widespread and significant impact that the oil and natural gas sector has on the U.S. economy.

As noted in the report, the effects of oil and natural gas are measured via three channels: “direct impacts from the employment and production within the oil and natural gas industry; indirect impacts through the industry’s purchases of intermediate and capital goods from a variety of other US industries; and induced impacts from the personal purchases of employees and business owners both within the oil and natural gas industry and its supply chain, as well as from the personal spending by shareholders out of the dividends received from oil and natural gas companies.”

The findings should be noted by elected officials, their appointees and staff, and the public at large:

● “In 2021, the oil and natural gas industry directly provided 2.3 million jobs for American workers, paid $278.5 billion in wages and salaries and benefits and proprietors’ income, and generated $773.6 billion in GDP. The industry’s direct national impact on the US jobs, labor income, and value added ranged from 1.1 percent to 3.3 percent in 2021.”

● As for the total – i.e., direct and indirect – economic impact of the oil and natural gas industry, the following chart from the study sums matters up:

All should take note of those bottom line numbers, i.e., 10.8 million jobs, $908.7 billion in labor income, and $1.8 trillion in total economic value added.

For good measure, the PWC provides estimated economic impact data by state. While all 50 states obviously accrue economic benefits from the oil and natural gas industry, the following two charts show the states where the total effects are largest:

Oil and Natural Gas = Small Business. Finally, the publication of this study means that this is the opportune time for SBE Council to remind all about the role of small businesses in this critical sector: small businesses overwhelmingly populate the firms at work in the oil and natural gas industries, in the sectors that serve those industries, and in key industries served by oil and natural gas.

The following are the percentage breakdowns of employer firms by number of employees in a variety of these sectors (2019 data latest from the U.S. Census Bureau, calculations by the author):

In the end, the oil and natural gas industry is vital to the U.S. economy, to U.S. competitiveness, to U.S. jobs, and to U.S. small businesses. When politicians and activists undermine oil and natural gas with excessive regulation and taxes, the reality is that the American economy, local economies, jobs and small business success are all being harmed.

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.