There are few sectors of the U.S. economy that provide as many jobs and generate as much wealth as the oil and natural gas industry. Roughly 9.2 million Americans are employed in oil and gas production – 83,820 in Mississippi alone plus another 114,194 in Tennessee. The industry’s total output accounts for about 7.2 percent of GDP.
Despite its obvious economic importance, the oil and gas industry is not part of the Obama administration’s solution to the nation’s unemployment problem. As a matter of fact, industry representatives were not invited to participate in the recent White House jobs summit.
Washington instead remains wedded to the idea that billions of dollars in taxpayer-financed “investments” to develop alternative sources of power that harness the energies of plant-life, the sun, the wind and the Earth’s own geothermal resources can wean Americans from fossil fuels and in the process create a superabundance of “green” jobs.
But the idea that such renewable energy sources soon will become commercially viable and employ large numbers of people historically has fallen short of expectations. It will continue to do so in the future. Solar and wind power still account for a tiny fraction of the nation’s total energy production, and, moreover, most of the components needed for solar arrays and wind turbines must be imported from abroad.
The inconvenient truth is that companies engaged in producing biofuels and other substitutes for oil and natural gas quickly would collapse if not for government handouts justified by the contentious claim that fossil-fuel burning is responsible for global warming.
By way of contrast, America’s oil and gas industry added 2 million new workers to the payroll between 2004 and 2007; it could employ hundreds of thousands more without a dime’s worth of wage or tax credits. All that is required is a more realistic energy policy: as Jack Gerard, president of the American Petroleum Institute said recently, “We need no subsidy or stimulus, all we need is access.”
Yet “access” to proven deposits of oil and natural gas, which would encourage capital spending and generate jobs, is exactly what Washington intends to block by delaying an offshore leasing program that envisages 31 parcel sales off the Atlantic, Pacific, Gulf and Alaskan coasts over the next five years and by maintaining barriers to drilling in the Arctic National Wildlife Refuge.
Not long ago, it was predicted that drilling in Texas’s Barnett Shale would produce 70,000 jobs; it already has created 111,000 of them. Production in the Marcellus Shale area of Pennsylvania and New York State likewise has generated 29,000 jobs this year – and more than 50,000 jobs are expected to be added there next year. But policymakers are contemplating adding to the industry’s regulatory compliance costs by shifting control over recovering natural gas from shale deposits from the states to the federal government. Bureaucrats pursuing a green agenda are unlikely to respect recent job gains.
And on top of this are plans to impose a punitive tax on oil and gas companies, to raise the royalties they pay and to impose a carbon “cap-and-trade” system on the U.S. economy.
With one in ten Americans out of work, unemployment is at a 26-year high. Burdening energy companies and energy consumers with additional taxes and fees during a recession will not bring economic recovery.
Greater energy production would provide real stimulus to the U.S. economy, put hundreds of thousands of people to work and generate hundreds of millions of dollars in extra tax revenue. The Obama administration instead proposes to rely on artificial means by shifting monies borrowed from taxpayers to bail out financial institutions to sponsor the hiring of people who would not otherwise be offered jobs.
Far better to place confidence in the private sector, which can put Americans to work productively, supply the nation’s energy as well as its other needs and do so without worsening the federal deficit and then firing the people it has hired when the subsidy runs out.
William F. Shughart II is F.A.P. Barnard Distinguished Professor of Economics at The University of Mississippi and a senior fellow of The Independent Institute. Contact him at www.olemiss.edu/~shughart or at the Department of Economics, P. O. Box 1848, University, MS 38677-1848.
William F. Shughart