The resurgence of the refining industry over the past few years has been dramatic. As I’ve mentioned in previous columns, production levels have reached totals not seen since the late 1980s and still increase. In 2012, total US production was almost 2.4 billion barrels, with 2013 rising to quite 2.7 billion. Us still relies on imports to satisfy about 40% of petroleum needs, but the rise in domestic supplies has helped reduce dependency on foreign oil and improve the US trade situation. In fact, the US is probably going to be the highest producer within the world by the top of the year.
Economic Stimulus
All of this exploration and production activity generates a considerable economic stimulus. We recently analyzed the economic benefits of oil and gas drilling and exploration activity within us and major energy-producing states. Here are some highlights from the study.
A primary reason for growth within the industry is technological advancements including horizontal drilling and hydraulic fracturing. Which have unlocked previously unrecoverable oil and gas reserves in shale plays? Early experiments in hydraulic fracturing began within the 1980s, but it had been decades later before the technique developed (and prices increased) to the purpose of creating drilling within shale plays economically feasible. With horizontal drilling and better exploration tools, the nation’s shale plays became primary sources of the latest production. These advances have also allowed for the rejuvenation of wells in older fields, further enhancing activity within the industry.
The oil surge has also been important to the economic recovery from the recent recession. While market conditions and price levels are currently less favorable to extensive gas exploration. There’s nonetheless a big level of investment in developing gas resources. Although direct employment within the industry may be a small percentage of total jobs, the work is usually well paying. Moreover, the ripple effects through the economy of this high value-added industry are large, especially in states which have a considerable concentration of support services ready to meet the requirements of oil and gas companies. We estimated the direct investment in oil and gas exploration and production (including various oilfield support activities), then quantified the entire economic benefits of this activity when multiplier effects through the economy are considered.