Sobering Numbers on American Energy

posted at 12:15 pm on January 7, 2011 by Jazz Shaw

This week the American Petroleum Institute (API) hosted a conference on “The State of American Energy” in Washington, which I attended. In it, API president Jack Gerard set forth some rather startling figures which speak to the future of the energy industry in the United States and how government policy will impact the effect this critical sector of our economy will have on jobs and the deficit – two areas of immense concern to the majority of Americans. (The full text of the address is available here.)

First, Gerard recapped some of the highlights from the previous year.

In 2010, oil and natural gas companies created 57,000 new jobs in Pennsylvania and West Virginia alone as part of the Marcellus Shale natural gas development.

The number-one ranking in Gallup’s “Job Creation Index” belongs to North Dakota, thanks to its record-breaking oil production numbers.

Last year, oil and natural gas companies’ investments in U.S. capital projects for this decade hit the two trillion dollar mark.

Finally, this industry provides the U.S. Treasury, on average, with well over $95 million each day in taxes, rent, royalties and bonus payments.

As to the future, there are two major areas of concern which may be directly affected by the government: expansion of areas of access for energy exploration and taxation of the energy industry as a whole. The Obama administration is faced with an opportunity to move forward in expanding the economy, creating jobs and stimulating government revenue, or to give in to populist impulse and pursue regressive policies.

Regarding expanded energy access, a recent study by Wood-Mackenzie examined the potential for allowing expanded oil and gas exploration, as well as the effect higher taxation on the energy industry would have. The results will come as no surprise to students of history.

Wood Mackenzie’s analysis found that increasing access leads to a direct increase in domestic production, jobs, and government revenue. Whereas increasing taxes reduces production and jobs. It is also detrimental to government revenues five years into the future.

Exploring the details of this study are well worth the time, but they follow a solid historical pattern. Some of the numbers should still prove eye-opening.

If access is expanded:
Direct Employment Potential: 130,000 direct jobs are estimated to be created by 2020 and 150,000 by 2025
Indirect* Employment Potential: 330,000 indirect jobs are estimated to be created by 2020, growing to 380,000 by 2025

If access is restricted and taxation of the industry expanded:
Direct Employment Potential: An estimated 50,000 jobs lost in 2014, dropping to 15,000 in 2020 and 8,000 in 2025
Indirect Employment Potential: An estimated decrease in employment of 120,000 in 2014, 35,000 in 2020 and 20,000 in 2025

When government attempts to recoup losses by taxing productivity, they kill the goose which has produced vast quantities of golden eggs. For the energy industry in particular, if we restrict opportunities for productivity, those opportunities do not disappear… they migrate elsewhere, taking much needed jobs across various market sectors with them. But by allowing one of the most successful industry avenues in the nation to expand – while ensuring maximum safeguards against environmental impact – the result is a net plus for both the government and the private sector.

Recent restrictions on the issuance of new drilling permits by the current administration have already proven disastrous. As this report from Investor’s Business Daily demonstrates, government policy has a real time effect on productivity if handled unwisely.

Since President Obama took office in January 2009, the price of oil has rocketed 117% to $90.41 a barrel and gasoline has jumped 67% to $3.07 a gallon. In the 34 industrialized nations, oil imports have surged 34% in the last year to $790 billion. The U.S. alone has seen a $72 billion jump.

All this imperils a fragile recovery from the financial crisis. “Oil prices are entering a dangerous zone for the global economy,” says Fatih Birol, chief economist at the International Energy Agency.

Given the clear threat, it’s economically irrational to sit on our hands and fail to develop our own energy resources. At least 130 billion barrels of oil and trillions of cubic feet of natural gas lie offshore, and hundreds of billions of barrels more are locked in shale deposits in the Northeast and West. Yet our policy remains leaving this wealth alone.

It’s a lot of material to cover, but two messages become clear. First, taxing our way out of poor government policy by attempting to target the more productive sectors of our economy will result in a net loss of both government revenue and jobs. Second, we have the resources available which will allow the private sector to produce the needed boost to our economy which the federal government can not. But the government itself can thwart this recovery if it submits to what passes for good political headlines.

DISCLOSURE: The author was invited to attend this conference with transportation and accommodation costs supplied by API. No other financial considerations were offered or accepted. There was no agreement to publish anything regarding the conference and API was not offered any preview of published material nor the opportunity to comment on it prior to publication.

Now you can yell at Jazz for being a stupid, wrong-headed RINO even faster than just by leaving a comment. Follow him on Twitter! @JazzShaw

This post was promoted from GreenRoom to HotAir.com.
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Comments

Calling Sarah Palin …

darwin on January 7, 2011 at 12:16 PM

Of course, Ed is just another shill for Big Oil.

API is lying. Wind mills will save us.

Al Gore said so.

catmman on January 7, 2011 at 12:19 PM

Ed = Jazz.

If I weren’t so distracted by the evil coal powered power plant, I wouldn’t have made such a mistake.

Gaia Rulz!

catmman on January 7, 2011 at 12:21 PM

catmman on January 7, 2011 at 12:19 PM

Except Ed didn’t write it.

Knucklehead on January 7, 2011 at 12:22 PM

Knucklehead on January 7, 2011 at 12:22 PM

Yeah, I caught that, hence my second comment.

Do you live under power lines?

:)

catmman on January 7, 2011 at 12:25 PM

AFAIK, No new nukes, coal fired plants or oil refineries in the last 30 years. Insane. China is building a new coal fired power plant every week.

Paul-Cincy on January 7, 2011 at 12:25 PM

This is why the economy will only see a slight bump this year. Well, that and debt.

We need to build like 3, 4, or even 5 state of the art oil refiniries in the US. We should work at being the leader for refining oil. Possibly get a lot of the oil shipped to the US to be refined then send it all over the world.

Plus we need to start building Nuclear reactors as well and start drilling for oil everywhere we can.

Neither of these will occur as long as we have nuts running the show.

jeffn21 on January 7, 2011 at 12:26 PM

Do you live under power lines?

:)

catmman on January 7, 2011 at 12:25 PM

As a matter of fact I do.

Knucklehead on January 7, 2011 at 12:27 PM

Knucklehead on January 7, 2011 at 12:27 PM

I KNEW IT!

* I hope you realize I messing with you… *

catmman on January 7, 2011 at 12:30 PM

I said this in the Green room version and i will say it here.

it isn’t about exploration and production… if you can’t get the damn permits to drill!

No permits, no jobs. No jobs, well.. you get the picture.

upinak on January 7, 2011 at 12:35 PM

But the government itself can is actively trying to thwart this recovery if it submits by submitting to what passes for good political headlines.

I think my edited version tends to more accurately portray the current situation.

Vashta.Nerada on January 7, 2011 at 12:37 PM

catmman on January 7, 2011 at 12:30 PM

Nice blog.

Knucklehead on January 7, 2011 at 12:41 PM

Just remember, if the “progressive” dhimocrapts have their way, they who live in the blue states, not the rest of us, will be the ones freezing in the dark. Of course, the feds, as they did before, will take our oil and gas away from us and give it to the blue states, in the name of “fairness” and humanity. You blue staters are going to reap the weeds you are planting. Have a nice winter.

Old Country Boy on January 7, 2011 at 12:43 PM

Not the study misses the point, but there is a MUCH wider affect than the oil & gas exploration and production jobs along with the support industry.

We must look “downstream” for the oil & gas fields, and refining is only a part of the picture. Downstream products/feedstocks for other items fans out and snowballs to a great extent, and hundreds of thousand, if not millions, of jobs and all the economy that these jobs support.

Kermit on January 7, 2011 at 12:47 PM

The left literally wants to take us all back to the dark ages.

Jvette on January 7, 2011 at 12:48 PM

The left literally wants to take us all back to the dark ages.

Jvette on January 7, 2011 at 12:48 PM

Yes, and have wanted to for a long time:

http://www.amazon.com/Coercive-Utopians-Deception-Americas-Players/dp/0895266180

Vashta.Nerada on January 7, 2011 at 1:00 PM

A couple of observations:
We’re not refining oil at a rate to meet demand in this country. The price per barrel is going to reach $100, and we’re seeing this affecting the economy.
We’re just getting into winter, with some of the coldest weather already in place, and January-February are generally the coldest.
The Regime is not doing anything to provide energy relief, in fact, ignoring a potential economic disaster is looming. Energy costs translate to increase prices in almost sector of the economy: Food and Transportation being hit the hardest. Then come’s jobs as companies try to contain their energy needs.

Has anyone looked at the price of food these days?

Kini on January 7, 2011 at 1:04 PM

Øbama: Ideology trumps economics.

petefrt on January 7, 2011 at 1:08 PM

Glenn Beck had a great spot yesterday showing the liberal media attacking President George W. Bush back when the price of gasoline broke through $2.00 a gallon.

Today it appears that the liberal media doesn’t think the President has much to do with the price of gasoline. Gasoline broke $3.00 in Georgia this week, and forecasts are for $4.00 by Memorial Day.

slickwillie2001 on January 7, 2011 at 1:12 PM

Well, look on the bright side. If things get bad enough they can nationalize the energy industry in order to meet the needs of the less fortunate because of greedy “big energy.”

WitchDoctor on January 7, 2011 at 1:13 PM

Barry ain’t going to be happy until gas is $8 gallon. All you proles can walk or bicycle. Only the “elite” will have cars.

GarandFan on January 7, 2011 at 1:15 PM

Calling Sarah Palin …
darwin on January 7, 2011 at 12:16 PM

Not here. Mr Shaw was unimpressed with her views on our approach to dealing with Iran so I would not think he would be interested in her take on domestic energy production.

What can you expect? You can’t hear Sarah’s position since she was told to leave the room.

We’d be headed in a much better direction if a President Palin put forth an energy policy that put the American economy and national security first, and to hell with the environazis that sell our sovereignty to assuage their liberal guilt.

turfmann on January 7, 2011 at 1:17 PM

Hey, it’s almost like the economy is a dynamic system that runs on energy!

Whooda thunk it?!

ZenDraken on January 7, 2011 at 1:18 PM

The left literally wants to take us all back to the dark ages.

Jvette on January 7, 2011 at 12:48 PM

Yes, and have wanted to for a long time:

http://www.amazon.com/Coercive-Utopians-Deception-Americas-Players/dp/0895266180

Vashta.Nerada on January 7, 2011 at 1:00 PM

Well, I’d settle for the Renaissance. I mean, you could talk like Monty Python (Holy Grail) and nobody would think you were weird. We’d have kings, and jousting and roasted turkey legs.

BobMbx on January 7, 2011 at 1:21 PM

Wind mills will save us.

Al Gore said so.

catmman on January 7, 2011 at 12:19 PM

pooh pooh. Wind mills will slow the rotation of the earth, and kill millions of birds.

BobMbx on January 7, 2011 at 1:24 PM

“disastrous”? Not from Obama’s and the left’s point of view, from which this looks wonderfully successful.

GaltBlvnAtty on January 7, 2011 at 1:34 PM

I’m trying to figure out why $3 a gallon gas when unemployment was low was an outrage but now it’s just ducky.

Cindy Munford on January 7, 2011 at 1:35 PM

I said this in the Green room version and i will say it here.

it isn’t about exploration and production… if you can’t get the damn permits to drill!

No permits, no jobs. No jobs, well.. you get the picture.

upinak on January 7, 2011 at 12:35 PM

I’m waiting for the day the states wake up and realize the state is sovereign territory. A state and it’s people have say over who drills or not … not the federal government.

The same with this federal land grab. Tell the federal government to screw off …

darwin on January 7, 2011 at 1:36 PM

And if I’m not mistaken don’t we have one of the largest reserves of coal anywhere in the world in this country? If someone gets a handle on making the output a little cleaner this could re-level the playing field especially if we get the oil and natural gas drilling restarted. Prices would come down and stabilize but unfortunately that goes against the current administrations plans/goals. Self sufficiency is definitely out of the question.

New Patriot on January 7, 2011 at 1:37 PM

We’d have kings, and jousting and roasted turkey legs.

BobMbx on January 7, 2011 at 1:21 PM

King Arthur: I am your king.
Woman: Well I didn’t vote for you.
King Arthur: You don’t vote for kings.
Woman: Well how’d you become king then?

Vashta.Nerada on January 7, 2011 at 1:40 PM

New Patriot on January 7, 2011 at 1:37 PM

Someone is just begging to be sent to reeducation camp!

turfmann on January 7, 2011 at 1:40 PM

The r’s are planning to hold hearings on bho’s czars, epa, etc. Maybe they can stop bho and team from stopping our oil companies from drilling. The only reason bho and team wants the U.S. so dependent on foreign oil, the greenies and complete control. I pray these r’s get to this stat!
L

letget on January 7, 2011 at 1:58 PM

This administration needs a “5-Hour Energy” policy

Neo-con Artist on January 7, 2011 at 2:04 PM

Knucklehead on January 7, 2011 at 12:41 PM

Thanks. I’m thinking of leaving Townhall. They have pretty much given up on their blog section. Was thinking about WordPress…

Hey, anyone out there have any suggestions for a personal blog platform?

catmman on January 7, 2011 at 2:14 PM

The religion of global warming prohibits energy exploration.

If you ever vote Democrat, that is what you’ll get. No matter how “blue dog” they claim to be.

scotash on January 7, 2011 at 2:18 PM

Finally, this industry provides the U.S. Treasury, on average, with well over $95 million each day in taxes, rent, royalties and bonus payments.

How does one make up 95 million a day with wind/solar??

journeyintothewhirlwind on January 7, 2011 at 2:19 PM

And then there are all the oil/gas royalties the federal and state governments are foregoing as our energy “policy” continues to nudge us away from our first of the first world status. Oh well, it’s not like they need the money or anything.

Are gas prices going up slowly enough for you this time, Barry?

SukieTawdry on January 7, 2011 at 2:22 PM

…taxing our way out of poor government policy by attempting to target the more productive sectors of our economy…

Why?

Because that’s where the money is.

iurockhead on January 7, 2011 at 2:39 PM

And if I’m not mistaken don’t we have one of the largest reserves of coal anywhere in the world in this country? If someone gets a handle on making the output a little cleaner this could re-level the playing field ……
New Patriot on January 7, 2011 at 1:37 PM

You mean something like this?

And this process uses low-quality lignite coal, which is quite abundant here in Texas. Yee-haw!

iurockhead on January 7, 2011 at 2:51 PM

Finally, this industry provides the U.S. Treasury, on average, with well over $95 million each day in taxes, rent, royalties and bonus payments.
How does one make SPEND up 95 million a day with wind/solar??

journeyintothewhirlwind on January 7, 2011 at 2:19 PM

There ya go, FIFY.

iurockhead on January 7, 2011 at 2:54 PM

I said this in the Green room version and i will say it here.

it isn’t about exploration and production… if you can’t get the damn permits to drill!

No permits, no jobs. No jobs, well.. you get the picture.

upinak on January 7, 2011 at 12:35 PM
I’m waiting for the day the states wake up and realize the state is sovereign territory. A state and it’s people have say over who drills or not … not the federal government.

The same with this federal land grab. Tell the federal government to screw off …

darwin on January 7, 2011 at 1:36 PM

I have been waiting for this one.
Invocation fo the 10th, and often, by states with ba!!$, would solve a LOT of this country’s problems.
But all of the states are cowardly whores bcs everyone of them has whored away some of their power to the feds over something.
It is disgustingly disgraceful.

And this process uses low-quality lignite coal, which is quite abundant here in Texas. Yee-haw!

iurockhead on January 7, 2011 at 2:51 PM

Gotta check otu your link.
Of course ND probably has some of the largest lignite reserves around.
This stuff is floating in the river in my back yard by the large chunk fulls.

Badger40 on January 7, 2011 at 3:25 PM

You mean something like this?

And this process uses low-quality lignite coal, which is quite abundant here in Texas. Yee-haw!

iurockhead on January 7, 2011 at 2:51 PM

The Center gets 28% of its funding from Federal sources. Will it still have the nerve to pursue progressive science that makes the Obama admin look bad if that money was quietly threatened to be rescinded?

Because you know this Presidency isn’t about finding solutions…it’s all about appearances for the sake of history….

rwenger43 on January 7, 2011 at 4:06 PM

Any R candidate can win in 2012 if all they do is break even on every issue except Energy but hammer Barry continuously with his energy failure. After all the talk in 2008, he has been a colossal fraud on the most important domestic issue that affects every American in countless ways.

Give me a decent R–any decent R–with the stones to take progressive action that re-consigns the EPA to the back seat, and I’ll vote for him(her).

rwenger43 on January 7, 2011 at 4:12 PM

The unemployment numbers from this jumped today. My brother, as well as many others, were laid off this morning from their jobs in the oil and natural gas fields off of Louisiana.

NWFLConservative on January 7, 2011 at 9:54 PM

We need to build like 3, 4, or even 5 state of the art oil refiniries in the US.
jeffn21 on January 7, 2011 at 12:26 PM

Not until someone steps forward to overcome the NIMBY syndrome. And until someone convinces the oil companies that refining in the US is profitable for them.

Yes, and have wanted to for a long time:
Vashta.Nerada on January 7, 2011 at 1:00 PM

Which is why liberals love Islam and jihaidis – much in common, just a quibble about which century – the 7th or the 14th.

and kill millions of birds.
BobMbx on January 7, 2011 at 1:24 PM

100,000 a year, but not a peep from the Audubon creeps.

Friendly21 on January 8, 2011 at 7:53 AM