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Who Owns America’s Oil and Natural Gas Companies
Robert J. Shapiro and Nam D. PhamOctober 2011
 
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Who Owns America’s Oil and Natural Gas Companies
Robert J. Shapiro and Nam D. Pham
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 I. Introduction and Summary
Broad ownership of public corporations, economic researchers find, yields substantialeconomic and social benefits. One critical benefit is stronger economic growth. Investors seek out the highest returns available, adjusted for their levels of risk. Thus, the pressures frominvestors buying and selling shares based on the performance of companies force thosecompanies to invest in the factors that help secure strong returns, including new plant andequipment, trained and knowledgeable personnel, and research and development. Broadownership of firms also supports economic efficiency. The economy’s overall efficiencydepends, in important part, on easy access to capital by firms which can use it productively, andbroad ownership of firms can provide much of that capital. Finally, and perhaps most important,broad ownership of corporations promotes social progress by enabling large numbers of peopleto benefit from the strong returns generated in an efficient, productive and growing economy.These dynamics are especially pertinent today, given the growing public perception thatmost of the benefits produced by the American economy flow to a very small number of people.While we do not address here issues of income disparity, this study will analyze the distributionof ownership of the U.S. oil and natural gas industry. This industry has attracted particularattention in the current debate: U.S. oil and natural gas companies are not only critical to theeconomy’s efficiency and strength; they also have experienced especially strong profits in recentyears. Who owns the industry and benefits from those profits, therefore, is a matter of genuineimportance and broad public interest.As we will see, nearly half of the shares of U.S.-based oil and natural gas companies areheld by public and private pension and retirement plans, including 401(k)s, and IRA’s, andindividual investors outside those plans own another 20 percent of the industry’s shares. Bycontrast, as we will also see, corporate-management owns less than 3 percent of the oil andnatural gas industry, including just one-half of one percent of the integrated oil and natural gascompanies.The benefits of this broad ownership have increased in recent years as the price of abarrel of oil has risen sharply, from$58.41 in 2006 and $93.05 in 2008 to $101.66 per-barrelover the first nine months of 2011.
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This research for this study was supported by the American Petroleum Institute (API). All analysis and viewsexpressed in the study are those solely of the authors.
It is noteworthy that these increases followed more than adecade of generally low oil prices; and the higher prices in recent years have principally reflecteda sharp and sustained expansion of worldwide demand for energy, led by China, India and otherdeveloping countries. This strong demand has pushed up worldwide oil prices.
 
The resulting
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Energy Information Administration, 2011. On October 7, 2011, the weekly average FOB price $94.37 per barrel.
 
2higher prices have produced, in part, the strong returns of U.S. oil and natural gas companies,and benefits for their broadly distributed owners.It is also notable that these recent, strong returns follow an extended period in which lowoil prices produced returns for the U.S. oil and natural gas industry which lagged those of muchof the rest of the American economy. Figure 1, below, tracks the daily prices of a leading indexof U.S. oil and natural gas companies, the NYSE Arca Oil Index, compared to the Dow JonesIndex, over the period from August 1983 to October 2011. As the graph shows, the daily pricesof oil and natural gas companies generally tracked the returns of the overall economy and marketfrom 1983 to 1991, significantly underperformed the economy-wide averages from 1991 to2004, when oil prices were low, and have out-performed the Dow Jones Index only since 2005.
Figure 1: Returns for the U.S. Oil Sector Compared to the Overall Economy:NYXE Arca Oil Index and Dow Jones Index,August 1983 - October 2011
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As noted, this analysis shows that the ownership of the U.S. oil and natural gas industryis broadly distributed, with only very small portions of its shares held by corporate management.
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Across all U.S.-based oil and natural gas companies, less than 3 percent of outstandingshares are held by the officers and board members of those companies. By contrast,nearly 50 percent of those shares are held by public and private pension plans, including
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The NYSE Arca Oil Index (XOI) is a price-weighted index that measures the performance of the oil industrythrough changes in the prices of a cross section of widely-held corporations involved in the exploration, production,and development of petroleum. 
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NYSE Arca Oil IndexDow Jones Index
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