Deeper Dive: The Economic Lift of Oil and Natural Gas Development
Posted September 5, 2013
More from the new IHS report on the economic impacts of U.S. unconventional oil and natural gas development – with a deeper focus on jobs.
We posted on the report's big numbers yesterday: IHS projects the full unconventional value chain – the oil and natural gas industry’s upstream, midstream and downstream sectors and energy-related chemical industries – could support 3.3 million jobs by 2020 and nearly 3.9 million by 2025. Energy from shale and other tight-rock formations supported 2.1 million jobs in 2012.
With the right policies the U.S. is looking at significant job creation from energy developed with hydraulic fracturing and horizontal drilling. This includes the oil and natural gas industry itself, sectors that support the industry with materials, supplies and equipment and areas that benefit as workers and families in these groups buy food, pay for housing, clothing, consumer items and more. Here’s the IHS chart with the various job sectors and categories over the study period:
The IHS analysis shows the true economic lift provided by oil and natural gas development, a dynamic that extends well beyond people who’re directly employed by industry:
Participants in the unconventional oil and gas value chain and in related chemicals industries use many different products and services. As a result, a change in the level of activity would result in both a direct contribution (through production and capital expenditures) and an indirect contribution (via supply chain dynamics) across a broad spectrum of sectors. The contribution of these first-tier supply chain industries in turn has implications for each supplier industry’s own supply chains, magnifying the indirect contribution.
IHS estimates that over the forecast period (up to 2025) one out of every eight U.S. jobs supported by unconventional oil and natural gas development will be in manufacturing.
By 2015, nearly 400,000 manufacturing jobs, or 3.2 percent of all U.S. manufacturing jobs, will be supported by unconventional oil and natural gas – rising to more than 500,000 (4.2 percent) in 2025.
Labor income (a measure that includes earnings and employer-provided benefits) from unconventional oil and natural gas and energy-related chemicals activity is projected by IHS to top $278 billion by 2025 (up from $149 billion in 2012).
For people employed directly by industry, labor income per employee is projected to increase to nearly $116,000 in 2015 and more than $123,000 in 2020 (from $107,000 in 2012).
Job creation in energy-related chemicals is projected by IHS to almost triple from slightly more than 53,000 in 2012 to about 149,000 in 2015 and nearly 319,000 in 2025.
One more stat that underscores the worth of these jobs to the U.S. economy: value added. That’s the difference between the cost of producing something or providing a service and the sales price of that product or service. IHS:
Value added for the entire unconventional energy value chain and energy-related chemicals was more than $284 billion in 2012 and is expected to reach almost $397 billion by 2015. By 2025, value added, estimated at almost $533 billion, will be 31% higher than in 2015. However, the short-term gains from these activities are even more substantial: from 2012 to 2015, value added is expected to increase at a rate in excess of 5% per year.
No question, the IHS jobs analysis depicts an oil and natural gas industry sector that is surging and will continue to surge with access to reserves, common-sense regulation and strategies – through tax and other policies – that foster energy investment.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.
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