The Unconventional Energy Revolution Fueling Economic Growth
The Unconventional oil and gas activity revolutionizing America's energy future is also bringing enormous benefits to its economy. The opportunity is fueled by a growing domestic supply of oil and natural gas unlocked by a series of technological innovations, primarily the combination of horizontal drilling with hydraulic fracturing, but also advances in seismic imaging and other technologies.
Unlocking unconventional energy will generate millions of jobs and billions in government receipts. It will make significant contributions to the US economy through direct employment, its many and diverse connections with supplier industries, the amount of spending this direct and indirect activity supports throughout the economy, and the revenues that flow to federal and state and local governments. As the production of unconventional oil and gas expands over the next 25 years, the economic contribution of the industry will also expand.
We are exploring this subject in depth in a new report America's New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy (you can download a complimentary 44-page section Volume 1: National Economic Contributions here)
Billions of Investment Expected in the United States This growth in oil and natural gas production is fueled by the exploration and production industry, which is driving the unconventional revolution with over $87 billion in capital expenditures in 2012 and annual capital expenditures in support of unconventional energy activity will grow to $172 billion by the end of the decade. Cumulative capital expenditures on unconventional oil and natural gas development are expected to exceed $5.1 trillion by 2035 (an average of some $200 billion annually over the entire period).
This spending takes place in upstream unconventional oil and natural gas activity and includes drilling, completion, facilities and gathering systems. Spending will feed into the broader supply chain through capital-intensive purchases of heavy equipment, iron and steel, and rig parts, as well as technical skills and services and information technology among others.
Millions of New, Well-Paying, Domestic Jobs Since the majority of the technology, tools, and know- how are home grown, an overwhelming majority of every dollar spent throughout this supply chain remains in the United States and supports domestic jobs. Extensive supply chains - across many states, including states that do not directly produce unconventional oil and natural gas - reach into multiple facets of the American economy.
In 2012, employment in the entire unconventional upstream sector will account for more than 1.7 million jobs, increasing to over 2.5 million jobs in 2015, almost 3 million jobs in 2020, and almost 3.5 million jobs by 2035, the end of the forecast period. Value added and labor income mirror this uninterrupted upward trend, with value added increasing from approximately $238 billion in 2012 to an average of $400 billion between 2020 and 2035. Labor income is forecast to double from about $125 billion in 2012 to $250 billion in 2035. Given the technologically innovative nature of unconventional oil and natural gas activities, the jobs attributed to these activities stand out from other employment opportunities. Using BLS total annual salary payments for all employees, including supervisory workers, and number of employees by sector in extraction and drilling one can calculate estimate an average hourly wage rate for all workers that implies $51.00 per hour. At the same time, we can compare BLS average hourly wage rates for production workers in the oil and natural gas extraction sector, where it is $35.15 per hour, to other industries - it is more than the hourly wage in the general economy (at $23.07 per hour) and more than wage rates paid in manufacturing (at $23.70 per hour), wholesale trade, education and many other industries.
Increased Local, State, and Federal Government Revenue This also means significant annual government revenues from all unconventional activity - $62 billion in 2012, more than $91 billion in 2015, and $111 billion in 2020. By 2035, the last year of the forecast period, government revenues will exceed $124 billion. Cumulative government receipts will top more than $2.5 trillion
Unlocking unconventional energy will generate millions of jobs and billions in government receipts. It will make significant contributions to the US economy through direct employment, the many and diverse connections it has with supplier industries, the amount of spending this direct and indirect activity supports throughout the entire economy, and the revenues that flow to federal and state and local governments.
America's New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy. Find out more about the report and download a complimentary 44-page section: Volume 1: National Economic Contributions here
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