As 2013 drew to a close, several reports were released that pointed out the last year was an excellent year for oil and natural gas production in Texas and the U.S., which had a positive impact on the economy.
For example, the U.S. Commerce Department released on Wednesday data showing that the trade deficit in November was the narrowest since October 2009.
Bloomberg News reported increased production from unconventional sources has created the decrease in the trade deficit. “The shale revolution and increased energy efficiency have pushed the U.S. a long ways toward energy independence in recent years,” Morgan Stanley economist Ted Wieseman wrote in a bulletin to clients. He noted that as recently as 2006, the inflation-adjusted deficit in oil trade was $266 billion. In 2013, through November, it was on track to shrink to $107 billion.
Meanwhile, a column by David Holt, president of the Consumers Energy Alliance, appeared in the Houston Chronicle that pointed out the top five ways energy production benefited consumers in 2013.
First, Holt reports the Energy Information Administration at the Department of Energy estimates the United States overtook Russia as the world’s largest oil and gas producer in November of this year.
“The change creates a net positive for consumers as the country produces an ever- increasing amount of oil and gas from domestic sources,” Holt said. “This reduces our dependence on foreign sources of oil and natural gas, and lowers transportation costs, translating to lower prices for end users. It also provides new economic growth as jobs are created, incomes rise, and tax bases expand due to the expanding energy industry.”
Holt said that the oil and gas boom contributes $1,200 to household income. He cited figures from IHS Global Insight the $1,200 is made up of a mixture of lower consumer prices, lower utility rates and rising incomes thanks to the availability of lower-cost domestic oil and gas resources.
Holt noted that because of the increase in supply, utility rates have decline and U.S. consumers pay as little as one third of what European consumers pay for home heating and electricity.
For example, in Pennsylvania, ratepayers have enjoyed a 33 percent drop in natural gas rates over the past five years.
Holt also notes during the increase in natural gas production has contributed more to lower income utility bills that the federal assistance plan, and the decrease in natural gas prices continues to bolster domestic manufacturing, particularly steel, chemical and plastics production.
Another study released by The University of Texas at San Antonio revealed the economic impact of oil and gas activity in West Texas will rise to $20.5 billion by 2022, supporting 30,500 full-time jobs and pay $1.8 billion in wages and salaries.
Oil and gas activity in plays such as the Cline shale and Wolfberry plays will generate $701 million in state revenues in 2022, including $334 million in severance taxes, creating close to $9.4 billion in gross regional product and contributing approximately $664 million in local government revenues.
Oil and gas activity in 2012 had an economic impact of nearly $14.5 billion in a 10-county area of West Texas, and supported nearly 21,450 full-time jobs and paid $1 billion in wages and salaries. The oil and gas industry also generated almost $472 million in state revenues in 2012 — including $187 million in severance taxes — and added approximately $6.2 billion in gross regional product, and contributed nearly $447 million in local government revenues.
The number of fulltime jobs supported by the oil and gas industry in 2022 compared with 2012 represents a 42.2 percent increase, a rate of growth that almost doubles the estimated 21.7 percent growth in total employment in the area for the same period, the report showed.
The $20.5 billion estimate is one of three scenarios of the economic impact of oil and gas activity in West Texas. This economic impact could range from as low as $7.6 billion or as high as $34.3 billion, due to variances in oil and gas prices, future oil and gas activity, and changes in the number of wells per rig and productivity per well.
Under the moderate scenario, nearly 3,800 horizontal wells are forecast to be drilled; the number of wells drilled could range from 1,930 to 5,900 under low and high estimate scenarios.
Alex Mills is president of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.