The oil and natural gas industry is one of the world's largest industries. Its revenues are large, as are the costs of providing consumers with the energy they need. Among those costs are finding and producing oil and natural gas, refining, distributing and marketing those refined products. The energy Americans consume today is brought to us by investments made years or even decades ago. Today's oil and natural gas industry earnings are invested in new technology, new production and environment and product quality improvements to meet tomorrow's energy needs. The industry's earnings are very much in line with other industries, and often they are lower. See below for more information.
This report shows that the ownership of the U.S. oil and natural gas industry is broadly distributed, with only very small portions of its shares held by corporate management. Across all U.S.-based oil and natural gas companies, less than 3 percent of outstanding shares are held by the officers and board members of those companies. By contrast, nearly 50 percent of those shares are held by public and private pension plans, including 401(k)s and IRAs. In addition, an additional 20 percent of those shares are owned by individual investors who manage their own holdings (and are not corporate management). The remaining 27 percent of shares are held by financial institutions and asset management companies.
The oil and natural gas industry is massive because it has to be to effectively compete for global energy resources. The industry’s earnings make possible the huge investments necessary to help ensure America’s energy security. The earnings allow companies to reinvest in the facilities, infrastructure and new technologies that keep America going strong well into the future while generating returns that meet shareholder expectations. API has assembled this primer to help consumers and policymakers better understand how the earnings of the oil and natural gas industry compare with other industries, who benefits, and where the money is going.
Oil and natural gas company holdings in state pension funds are providing disproportionately strong returns for retirees, according to a new study by Sonecon, commissioned by API. While oil and natural gas stocks make up an average of 3.9 percent of public pension holdings in four key states, they accounted for an average of 8.6 percent of the returns in these accounts from 2005 to 2008.
The United States is at an historic turning point for the country and its energy policies. But many Americans lack a full understanding of the oil and natural gas industry. API has assembled this oil and gasoline primer to encourage a constructive public policy debate that leads to a new fact-based comprehensive energy policy.
Sections include discussions of U.S. energy needs, investments, carbon mitigation, refineries and fuels, untapped potential of domestic resources, factors affecting price, global energy framework, and energy policy.
Today's oil and natural gas industry earnings are invested in new technology, new production and environment and product quality improvements to meet tomorrow's energy needs. This new Ernst & Young study shows the five major oil companies had $765 billion of new investment between 1992 and 2006, compared to net income of $662 billion during the same period. The industry overall, which includes 57 of the largest U.S. oil and natural gas companies, had new investments of $1.25 trillion over the same period, compared to net income of $900 billion and cash flows of $1.77 trillion. High oil and gas prices in recent years increased oil and natural gas companies’ cash flows from operations and net income, which facilitated record levels of investment spending. Download the complete report below (Published May 2007) .
Worldwide prices for energy, like other global commodities, periodically rise and fall dramatically. When the worldwide price of oil and gas goes up sharply, rising costs for American families often spur calls in Washington for new taxes on the "windfall profits" of oil and gas companies. However politically appealing these proposals may seem, research and experience show such taxes create serious economic problems.
This study analyzes in detail the economic impact of the proposed "Windfall Profits Rebate Act of 2005" on federal, state and local public employee pension funds, which hold a relatively large share of their assets in corporate stocks, including shares in domestic oil and gas companies. This makes these pension plans especially vulnerable to the costs of a windfall profits tax.