The U.S. Recovery in Oil and Natural Gas Production
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.
