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PwC study: The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy

PwC study: The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy

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Published by Energy Tomorrow
The American Petroleum Institute (API) has engaged PwC to perform a study to determine the economic impacts of the oil and natural gas industry. The study found that the oil and natural gas industry, a vital link in the nation's energy supply, makes important contributions to the U.S. economy by providing an economical energy source for transportation and the production of other goods and services. The oil and natural gas industry currently supplies more than 60 percent of the nation's total energy demands and more than 99 percent of the fuel used by Americans in their cars and trucks, while 900 of the next 1000 U.S. power plants are projected to use natural gas.
The American Petroleum Institute (API) has engaged PwC to perform a study to determine the economic impacts of the oil and natural gas industry. The study found that the oil and natural gas industry, a vital link in the nation's energy supply, makes important contributions to the U.S. economy by providing an economical energy source for transportation and the production of other goods and services. The oil and natural gas industry currently supplies more than 60 percent of the nation's total energy demands and more than 99 percent of the fuel used by Americans in their cars and trucks, while 900 of the next 1000 U.S. power plants are projected to use natural gas.

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Published by: Energy Tomorrow on Sep 21, 2009
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THE ECONOMIC IMPACTS OF THE OIL ANDNATURAL GAS INDUSTRY ON THE U.S.ECONOMY: EMPLOYMENT, LABOR INCOMEAND VALUE ADDED
Prepared for
American Petroleum Institute
September 8, 2009
 
National Economics & Statistics
 
i
THE ECONOMIC IMPACTS OF THE OIL AND NATURAL GAS INDUSTRY ON THEU.S. ECONOMY: EMPLOYMENT, LABOR INCOME AND VALUE ADDEDTABLE OF CONTENTS
PageEXECUTIVE SUMMARY.......................................................................................................1I. INTRODUCTION........................................................................................................4II. INDUSTRY DEFINITION............................................................................................6III. TOTAL ECONOMIC IMPACT....................................................................................9IV. ECONOMIC IMPACT BREAKDOWN: DIRECT, INDIRECT, AND INDUCEDIMPACTS.................................................................................................................15 APPENDICES: A. DETAILED STATE-BY-STATE OPERATIONAL IMPACT RESULTS..................A-1B. DATA SOURCES AND METHODOLOGY...........................................................B-1
 
1
THE ECONOMIC IMPACTS OF THE OIL AND NATURAL GAS INDUSTRY ON THEU.S. ECONOMY: EMPLOYMENT, LABOR INCOME AND VALUE ADDEDExecutive Summary
The oil and natural gas industry, a vital link in the nation's energy supply, makesimportant contributions to the U.S. economy by providing an economical energy sourcefor transportation and the production of other goods and services. The oil and naturalgas industry currently supplies more than 60% of the nation's total energy demands andmore than 99% of the fuel used by Americans in their cars and trucks
1
, while 900 of thenext 1000 U.S. power plants are projected to use natural gas.
2
 In addition to the important products made available by the oil and natural gas industry,the industry also makes significant economic contributions as an employer andpurchaser of goods and services. The oil and natural gas industry is one of the largestemployers in the country, employing millions of Americans in exploring, producing,processing, transporting, and marketing oil and natural gas. Millions of jobs in other industries are supported by the oil and natural gas industry’s purchases of intermediateinputs and capital goods from other U.S. producers. These businesses includeequipment suppliers, construction services, management services, food services, andmany other types of support services. These supporting businesses, in turn, purchasegoods and services, spurring additional economic activities. Further, employees andbusiness owners make personal purchases out of the additional income that isgenerated by this process, sending more new demands rippling through the economy.The purpose of this report is to quantify the contribution of the U.S. oil and natural gasindustry to the U.S. national and state economies in terms of employment, labor income(including wages and salaries and benefits, as well as proprietors' income), and valueadded.
3
The
direct impact 
is measured as the jobs, labor income, and value addedwithin the oil and natural gas industry. The
indirect impact 
is measured as the jobs,labor income, and value added occurring within other industries that provide goods andservices to the oil and natural gas industry. The
induced impact 
is measured as the jobs, labor income, and value added resulting from household spending of incomeearned either directly or indirectly from the oil and natural gas industry’s spending. Thecombination of these three effects comprises the total contribution of the U.S. oil andnatural gas industry. At the national level, this report quantifies both the industry’s
operational impact 
(due to purchases of intermediate inputs) and
capital investment impact 
(due to purchases of new structures and equipment). The report does notaddress the economic effects of the use of oil and natural gas in the economy.In 2007, the most recent year for which data are available, PricewaterhouseCoopersestimates that, combining the operational and capital investment impacts, the U.S. oiland natural gas industry's total employment contribution to the national economyamounted to 9.2 million full-time and part-time jobs, accounting for 5.2 percent of thetotal employment in the country (see
Table E-1
). The associated labor income,
1
http://www.api.org/aboutoilgas/ and http://www.energy.gov/energysources/oil.htm
2
http://www.energy.gov/energysources/naturalgas.htm
3
 
Value added refers to the additional value created at a particular stage of production. It is a measure of the overall importance of an industry. Value added consists of: employee compensation, proprietors'income, income to capital owners from property, and indirect business taxes (i.e., those borne by consumersrather than producers).
 

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