by Raymond J. Keating –

The recovery of the U.S. oil and natural gas sector has been a good news story amidst lingering pandemic economic woes, misguided and costly public policy decisions, recession realities and threats, and of course, Russia’s continuing egregious war against Ukraine. And small business plays a big part.

In the following chart, we see the long-term trend in U.S. crude oil production, including the long decline in output from 1970 to 2008, the subsequent dramatic reversal thanks to innovations in areas like hydraulic fracturing and horizontal drilling, and then the dramatic decline in output due to the pandemic. And amidst all kinds of challenges, U.S. crude oil production has climbed back notably, almost to where it was pre-pandemic.

A similar story has played out in terms of U.S. natural gas production. Again, we see the dramatic takeoff in U.S. production starting in the middle of the first decade of the twenty-first century, thanks to those aforementioned innovations. What’s even more impressive is that natural gas production recently surpassed its pre-pandemic levels.

As SBE Council often has pointed out, key energy sectors of our economy aren’t just about so-called “Big Oil,” but instead are overwhelmingly populated by smaller enterprises. Consider the following tables (2019 data latest from the U.S. Census Bureau, calculations by the author) showing that sector after sector on the energy front, including related manufacturers, is about small businesses.

Oil and Gas Extraction Sector    Percent of Firms by Number of Employees
Fewer than 10 employees    81.4%
Fewer than 20 employees    89.1%
Fewer than 100 employees    95.6%
Fewer than 500 employees    98.1%
Drilling Oil and Gas Wells      Percent of Firms by Number of Employees
Fewer than 10 employees      69.8%
Fewer than 20 employees      79.6%
Fewer than 100 employees      93.2%
Fewer than 500 employees      97.2%
Support Activities for Oil and Gas Operations    Percent of Firms by Number of Employees
Fewer than 10 employees    69.4%
Fewer than 20 employees    80.2%
Fewer than 100 employees    94.4%
Fewer than 500 employees    98.4%
Oil and Gas Pipeline and Related Structures Construction    Percent of Firms by Number of Employees
Fewer than 10 employees    42.7%
Fewer than 20 employees    56.7%
Fewer than 100 employees    83.4%
Fewer than 500 employees    94.2%
Oil and Gas Field Machinery and Equipment Manufacturing    Percent of Firms by Number of Employees
Fewer than 10 employees      40.4%
Fewer than 20 employees      55.5%
Fewer than 100 employees       80.2%
Fewer than 500 employees      89.8%
Pipeline Transportation of Crude Oil    Percent of Firms by Number of Employees
Fewer than 10 employees    38.6%
Fewer than 20 employees    47.0%
Fewer than 100 employees    55.4%
Fewer than 500 employees    59.0%
Pipeline Transportation of Natural Gas    Percent of Firms by Number of Employees
Fewer than 10 employees     39.3%
Fewer than 20 employees    49.6%
Fewer than 100 employees    58.1%
Fewer than 500 employees    64.1%
Pipeline Transportation of Refined Petroleum Products    Percent of Firms by Number of Employees
Fewer than 20 employees    43.6%
Fewer than 100 employees    49.3%
Fewer than 500 employees    54.9%
Gasoline Stations    Percent of Firms by Number of Employees
Fewer than 10 employees    80.1%
Fewer than 20 employees    93.3%
Fewer than 100 employees    98.6%
Fewer than 500 employees    99.6%
Petroleum Refiners    Percent of Firms by Number of Employees    
Fewer than 20 employees    20.0%
Fewer than 100 employees    25.0%
Fewer than 500 employees    37.5%
Petroleum Lubricating Oil and Grease Manufacturing    Percent of Firms by Number of Employees
Fewer than 10 employees    37.9%
Fewer than 20 employees    52.5%
Fewer than 100 employees    74.6%
Fewer than 500 employees    86.3%
Petroleum and Petroleum Products Merchant Wholesalers    Percent of Firms by Number of Employees
Fewer than 10 employees    51.5%
Fewer than 20 employees    66.1%
Fewer than 100 employees    87.1%
Fewer than 500 employees    95.5%
Plastics Product Manufacturing    Percent of Firms by Number of Employees
Fewer than 10 employees    38.2%
Fewer than 20 employees    53.0%
Fewer than 100 employees    81.2%
Fewer than 500 employees    93.5%

Policies Must Promote U.S. Energy

Federal government hostility to U.S. oil and natural gas production, that is, hostility toward the entrepreneurs, small business, big businesses, investors and workers that operate in these sectors, never has made any sense. It’s been pure pandering politics winning out over sound economic policymaking.

Congress and the White House need to refocus energy policy so as to encourage U.S. energy production. That means, for example, opening federal lands and waters to exploration and production; rolling back excessive taxes and regulations rather than seeking to impose additional burdens; and streamlining the permitting and approval process for U.S. energy infrastructure (such as pipelines) and investments in production facilities.

These are the kinds of policy changes that will boost U.S. energy production and economic growth now and into the future.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.

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