A: Very big and very important, according to a recent study by PricewaterhouseCoopers titled “Economic Impacts of the Oil and Natural Gas Industry on the US Economy in 2011.”
In 2011, the oil and gas industry contributed more than $1.1 trillion towards US GDP of about $15 trillion in that year, according to the PwC report. That represents 7.3% of the total economic output of the U.S. economy in 2011, and comes from $481 billion in direct impact (jobs, income and value added within the industry), $494 billion in indirect impact (jobs, income and value added throughout the supply chain of the oil and gas industry) and $126 billion in induced impact (jobs, income and value added from household spending of the income earned directly or indirectly from the industry’s spending).
The chart above helps to put the size of America’s oil and natural gas industry into perspective. If the US oil and gas industry was considered as a separate national economy, it would have ranked as the world’s 16th largest economy with “GDP” in 2011 of $1.1 trillion, with just slightly less economic output as the entire national economies of South Korea ($1.11 trillion in GDP) and Mexico ($1.15 trillion in GDP), and not too far behind the GDP of Australia and Spain, based on World Bank data.
Here’s another way to put America’s enormous energy sector into perspective:
Q: Which is larger, America’s oil and gas industry, or the entire national economy of Saudi Arabia?
A. Even with the world’s largest reserves of crude oil and current production of more than 11 million barrels of oil per day, the output of Saudi Arabia’s entire economy at $580 billion in GDP in 2011 was only about half of the size of America’s oil and gas industry at $1.1 trillion.
The PwC report also estimates that the oil and gas industry supports more than 9.6 million jobs in the US economy, with about 2.6 million Americans working directly in the industry, and nearly 7 million additional jobs supported throughout the economy from the indirect and induced effects of the energy industry.
Bottom Line: America’s oil and gas industry is enormous, as is its impact on the US economy. And the positive impact of the oil and gas industry gets stronger all the time, as domestic energy output increases – North Dakota is producing record amounts of oil, Texas oil output has doubled in just the last three years to the highest level since 1987 (Eagle Ford Shale in Texas now ranks as the largest single oil and gas development in the world based on capital expenditures) and the US has probably just surpassed 7 million barrels per day in domestic oil production for the first time in more than 20 years. Domestic natural gas production reached a record high last year, bringing prices down to record low levels and rolling the carbon clock back by several decades. With all of the increased domestic production of oil and gas, the US was more energy self-sufficient in 2012 than in 20 years – we produced more than 83% of the total energy consumed last year (based on data for the first nine months) for the first time since 1991.
When we consider that the economic impact of America’s oil and natural gas industry is like adding the entire economic output of Mexico or South Korea to the US economy, it helps us understand and appreciate the enormous contribution and value of that one industry to our economy. With sensible tax and regulatory policies, and increased access to our nation’s vast energy treasures, there’s no reason why the US oil and gas industry won’t continue to expand and increase its economic footprint. Let’s hope that the economic output of the US oil and gas industry will one day surpass the GDP of economies like South Korea, Mexico and Australia. Or even Spain or Canada.