The U.S. oil and natural-gas rush will add 1.7 million jobs this year at wages on average of about $35 an hour, “dramatically higher” than the average $23 an hour for other jobs in the economy, says consultant IHS in a new report.
IHS also forecasts the number of U.S. jobs in this booming industry will swell to 2.5 million by 2015, and to nearly 3.5 million jobs in 2035, noting this will be “high-quality and high-paying” work paying more than manufacturing jobs.
And it’s not just jobs working on oil rigs. The U.S. oil and gas industry is creating onshore manufacturing jobs to make, say, drilling equipment, as well as computer-technology services for things like seismic assays, and legal and consulting jobs. To read the report, click here.
And IHS forecasts unconventional oil and gas will add $237 billion to U.S. GDP in 2012, increasing to $475 billion in 2035.
The report comes as nearly 12.1 million are out of work, and a full 21 million Americans remain out of work or underemployed, notes FOX Business senior editor Charles Brady. The U.S. economy is growing at a tepid 1.3% annualized rate, half the rate it was expanding at nearly two years ago.
“In addition to the jobs directly created by an increase in drilling, there will also be a need for thousands of people to feed all these workers and to provide housing,” notes Brady. “As all of these newly employed folks start spending and consuming, the multiplier effect on economic growth will be significant.”
Federal and state governments are expected to get $91 billion from the sector in 2015, rising to $111 billion in 2020 and to more than $124 billion in 2035, depending on whether future Administrations and Congress yank the tax breaks for the industry.
Industry groups including the Natural Gas Supply Association, the American Petroleum Institute and the American Chemistry Council helped fund the research, which IHS says it conducted independently.
So, why has there been so much resistance from the Administration and members of Congress to new drilling permits and projects like the Keystone Pipeline?
According to the Bureau of Land Management, in fiscal year 2011, 2,188 leases were issued for energy development on federal lands, down 37% from fiscal year 2007, when 3,499 leases were issued.
The rise in unconventional oil and gas production “has not only contributed to U.S. energy security but is a significant source of new jobs and economic activity at a time when the economy is a top priority,” says Daniel Yergin, IHS vice chairman in a statement. “The United States currently has the highest rate of growth in crude oil production capacity in the world and is virtually self-sufficient in natural gas,” he adds.
John Larson, IHS vice president, public sector consulting, said in a statement: “The industry, highly capital-intensive by nature, relies on suppliers in construction, fabricated materials and heavy equipment but it also requires a broad range of material and services such as legal and financial services and information technology.”
He adds: “The United States is a world leader in all parts of unconventional oil and gas activity which means that most of the dollars spent here stay and support American jobs.”
Unconventional oil accounts for about two million barrels per day of U.S. production in 2012, IHS said, and is expected to make a whopping jump of nearly 70% by 2015, to more than 3.5 million barrels of oil per day. Production is expected to double to 4.4 million barrels per day by 2020.
Shale and “tight” gas production is expected to increase 22% to almost 42 billion cubic feet per day by 2015, or 65% of U.S. gas production, IHS says, and hit 76 bcf/d in 2035.
The sector is expected to add nearly $5.1 trillion in capital expenditures from now until 2035, much of it spent on breaking into rock formations to unlock the energy supply.
The new report comes as the Environmental Protection Agency is debating behind the scenes how to regulate hydraulic fracturing or "fracking," used by drillers to unlock unconventional oil and gas trapped in rock formations. A number of local U.S. communities fear the chemical run-off from fracking is now polluting their water supplies.
IHS notes that the unconventional oil and gas industry is regulated by the states, as it is operating on private land.
President Barack Obama and GOP candidate Mitt Romney have proposed nixing tax breaks for the industry in order to help reduce the growing federal deficit, now more than $16 trillion.
Yergin wrote about the U.S. Energy Revolution recently in The Wall Street Journal, in an article titled “The Real Stimulus: Low-Cost Natural Gas.”
In his article, Yergin notes geopolitical implications of the U.S. oil and gas “renaissance” that reach beyond supply issues. The increase in U.S. oil production since 2008 is equal to nearly “80% of what was Iran's export level before the imposition of sanctions on the Tehran regime,” Yergin says. “Without the additional oil coming from the surge in U.S. oil output, the Iranian oil sanctions could not have worked as well as they have.”
And stable natural gas prices have lured chemical companies back into the U.S., stopping them from outsourcing jobs and entire factories to low cost countries, Yergin says.
Government data show “the US is on the fast track to becoming energy independent and an energy-producing superpower,” notes economist Edward Yardeni. “That’s as long as the US government doesn’t get in the way.”
Supply matters in driving down prices, as media pundits have decried the role of governments in affecting the price of gasoline, despite the fact that government members of OPEC control an estimated 40% of the world’s oil supply and as a matter of practice increase or decrease stated production quotas (with much cheating) to alter the price of oil, and thus pull in government revenues used in social spending.
On July 14, 2008, President George W. Bush lifted the moratorium on offshore drilling, and by September, the price of gas sunk more than thirty cents to $3.70, as the oil and gas markets began to forecast increased U.S. oil production could supplant imports from Saudi Arabia and other OPEC members.
Oil and gas production are at their highest levels since 1995, when gas cost $1.17. Today, gas costs about $3.81. In 1995, a barrel of oil cost $19 versus $86 today.
Yardeni says that U.S. gas output has driven the futures price of natural gas down from a peak of $13.58 per MBTU in July 2008 to $3.54. He notes that the 12-month sum of US natural gas production has soared 33.7% by July of this year from a low in May 2006.
And Yardeni says: “Over this same period, domestic natural gas consumption rose 15.8%” while “imports fell 24.5%.”
Yardeni says: “The crude oil story is just as upbeat for the US because output is soaring as domestic usage is falling. Field production rose to a new cyclical high of 6.0 mbd on average over the past 52 weeks through the week of October 12 That’s up roughly 1.0 mbd over the past four years, and the highest since October 22, 1999.”
Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007 and is the author of Skirting Heresy: The Life and Times of Margery Kempe (Franciscan Media, June 2014).
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.