Markey’s Questions: Job Creation

Mark Green
Posted December 14, 2011

Earlier this month, API sent U.S. Rep. Edward Markey a letter responding to a dozen or so questions the Democrat posed about the oil and natural gas industry. Here’s the blog post on the exchange with Markey, which also was discussed in a conference call with reporters by API President and CEO Jack Gerard.

What we want to do here is kick off a series of posts that take a closer look at Markey’s questions, which, as Gerard said during the call with reporters, show a fundamental misunderstanding of the industry. That’s OK, because a number of Markey’s misnomers are pretty common in the public discourse. So, over the next few weeks we’ll delve deeper into the facts raised by the congressman’s queries.

Today: Jobs. Here’s a distillation of Markey’s questions on job creation:

Markey: With 165,000 Americans working for the oil and natural gas industry, according to the Bureau of Labor Statistics, a New York Times Magazine analysis says it’s unlikely job gains in the sector would make a dent in the 25 million Americans who are unemployed or underemployed. … As for industry’s claim that it could create 1 million new jobs by 2018, isn’t its advertising on that point misleading? And what about a BLS projection that the industry will lose jobs due to greater efficiency? Finally, if the public opposes industry’s push to open areas to energy development onshore and offshore, how can it create enough jobs to offset the losses BLS predicts?

That’s a lot of questions, but you get the drift. So, let’s break it down, with a big h/t to Kyle Isakower, API’s vice president of regulatory and economic policy:

• First of all, the BLS stat Markey cites for oil and gas employment is pretty narrowly defined and considers only salaried employees working in oil and gas extraction. More accurate is a 2011 PricewaterhouseCoopers study that pegs direct employment in U.S. oil and gas activities in the pre-refinery stages at nearly 782,000 in 2009.
• The Wood Mackenzie energy consulting firm reported in September that with the right set of pro-energy development policies in place, 1 million new U.S. jobs could be created by 2018. That’s direct industry jobs as well as indirect and induced ones. Isakower:

“The estimated indirect and induced jobs that could be created by pro-development policies are actually quite conservative given that the multiplier used by Wood Mackenzie is significantly lower than published Bureau of Economic Analysis employment multipliers relevant to the oil and natural gas industry.”

• About multipliers in job projections, it seems including indirect/induced jobs in employment modeling only became controversial when they were applied to the oil and natural gas industry. More on that here. Isakower:

“The full macro-economic effect of economic investment goes well beyond direct employment. Not only is this concept accepted by almost all mainstream economists, but Dr. Wassily Leontief won a Nobel Prize for developing the input-output methodology that includes this effect. In fact, most recent estimates of jobs impacts, including estimates of the administration’s recent jobs proposal, include direct, indirect and induced effects in their calculations.”

• It’s pretty snarky, in this economy, to diminish any new job as not making a “dent” in the overall jobless figure. Let’s let 1 million Americans who’re currently out of work decide whether their new job would be significant.
• On projected job losses by BLS, here’s the deal: Wood Mackenzie projects incremental job gains under pro-development, increased-access policies, as compared to the status quo. The BLS projection doesn’t include potential employment gains from expanded access or breakthroughs in technologies used to get oil and natural gas from shale. Wood Mackenzie’s analysis projects modest increases in industry employment without changes in policy. If BLS’ numbers were used as a baseline, job creation under the pro-development strategy would be even greater.
• We think Markey’s got it wrong on the public’s temperature for increased energy resource access. A Rasmussen poll in June [subscription required] showed 75 percent of Americans don’t think the U.S. is doing enough to develop its own oil and natural gas resources, while a November Pew/Washington Post poll found nearly 60 percent of Americans want policies that allow more oil and natural gas development – onshore and offshore.

Wood Mackenzie accounts for job losses linked to the depletion of resources though it doesn’t explicitly factor in job losses due to gains in efficiency. Even so, the job effects of efficiency gains in the BLS projection would be swamped by positive investment flows coming from increased access. Isakower:

“Since the BLS projection does not incorporate potential employment gains from expanded access or recent breakthroughs in producing oil and natural gas from shale, their projected job losses are premised on incomplete information. Again, if Wood Mackenzie had not assumed modest job creation in their (status quo) baseline, incremental job gains would have been even greater.”

OK? Next question.