by Raymond J. Keating-
The deep economic downturn we are experiencing obviously has resulted in a dramatic drop in energy demand. And that obviously manifests itself in a big decline in prices, such as the price of oil falling from $52.78 a barrel on February 20 to $22.76 on April 9.
While there’s been a great deal of talk about the governments of Russia, Saudi Arabia, and Mexico trying to work out deals to cut production, that’s largely a sideshow. After all, producers by necessity will have to cut production in the face of vastly reduced demand.
The more important question is about how energy companies will, or will not, survive during this pandemic and government-directed shutdown. And in that vein, it is critical for the public and policymakers to keep in mind that most employer firms in the oil and natural gas sectors are small and midsize businesses.
Consider the breakdown among employer firms (latest Census Bureau data 2017) in major energy sectors:
Oil and Natural Gas Extraction
| Size of Firms by Number of Employees | Percent of Total Employer Firms in the Oil and Natural Gas Extraction Sector |
| Less than 10 | 81.9% |
| Less than 20 | 89.4% |
| Less than 100 | 96.0% |
| Less than 500 | 98.1% |
Drilling Oil and Gas Wells
| Size of Firms by Number of Employees | Percent of Total Employer Firms in the Drilling Oil and Gas Wells Sector |
| Less than 10 | 70.5% |
| Less than 20 | 80.5% |
| Less than 100 | 93.4% |
| Less than 500 | 97.4% |
Support Activities for Oil and Gas Operations
| Size of Firms by Number of Employees | Percent of Total Employer Firms in the Support Activities for Oil and Gas Operations Sector |
| Less than 10 | 71.4% |
| Less than 20 | 82.9% |
| Less than 100 | 95.4% |
| Less than 500 | 98.4% |
Oil and Gas Pipeline and Related Structures Construction
| Size of Firms by Number of Employees | Percent of Total Employer Firms in the Oil and Gas Pipeline and Related Structures Construction Sector |
| Less than 10 | 44.9% |
| Less than 20 | 59.8% |
| Less than 100 | 84.3% |
| Less than 500 | 95.1% |
Oil and Gas Field Machinery and Equipment Manufacturing
| Size of Firms by Number of Employees | Percent of Total Employer Firms in the Oil and Gas Field Machinery and Equipment Manufacturing Sector |
| Less than 10 | 40.9% |
| Less than 20 | 58.2% |
| Less than 100 | 82.4% |
| Less than 500 | 91.9% |
As we look ahead, some of the most productive ways to boost the entrepreneurs, small firms and big businesses at work in the energy sector would be to reduce governmental burdens – such as unnecessary regulations – placed on these businesses.