Economist Dr. Ray Perryman calls the resurgence of the oil industry in the last few years “dramatic,” and said production levels have climbed to totals not seen in the country for three decades.
Perryman, president and chief executive officer of The Perryman Group, estimates that the total economic benefits of oil and gas exploration and development activity each year top nearly $1.2 trillion in gross product each year, as well as more than 9.3 million permanent jobs in the United States.
“When you include the ripple effects through the economy, oil and natural gas exploration and production supports nearly 7 percent of the U.S. economy,” he reported recently.
Production levels have reached totals not seen since the late 1980s and continue to increase, he said. In 2012, total U.S. production was almost 2.4 billion barrels, with 2013 rising to more than 2.7 billion. He believes the country will be the world’s leading producer by the end of the year.
Although the U.S. still relies on imports to meet about 40 percent of crude oil needs, the increase in domestic supplies has helped reduce dependency on foreign oil and improve the country’s trade situation, he added.
“A primary reason for this growth is technological advancements including horizontal drilling and hydraulic fracturing, which have unlocked previously unrecoverable oil and natural gas reserves in shale plays,” Perryman said. “Early experiments in hydraulic fracturing began in the 1980s, but it was decades later before the technique developed (and prices increased) to the point of making drilling within shale plays economically feasible. With horizontal drilling and better exploration tools, the nation’s shale plays have become primary sources of new production.”
The oil surge has also been important to the economic recovery from the recent recession. While market conditions and price levels are currently less favorable to extensive natural gas exploration, there is nonetheless a significant level of investment in developing natural gas resources. Although direct employment in the industry is a small percentage of total jobs, the work is often well paying. Moreover, the ripple effects through the economy of this high value-added industry are large, especially in states which have a substantial concentration of support services.
The Perryman Group also found that the economic benefits of oil and natural gas production have more than doubled over the past 10 years, even after accounting for the effects of inflation.
“The new jobs created by the oil and gas sector since the recovery from the recession began are responsible for about 30 percent of the national increase,” Perryman said.
After assessing several major energy-producing states, he found that Texas gains the largest economic benefits from the substantial oil and gas reserves in the state and the long history of the industry and resulting supporting sectors.
In states where oil production has only recently begun to escalate, such as North Dakota, support industries are still developing and benefits to the state’s economy are less. North Dakota, however, sees benefits of more than 100,000 jobs in an economy with total employment of only about 500,000, he said, adding that overall economic effects will continue to rise.
“While changing market conditions will lead to cycles in the industry, the oil and gas industry will be a driver of substantial economic activity for many years to come,” he said.