For well over a century, the vast reserves of oil and natural gas in Texas have contributed to business activity and job creation. We recently took a close look at the overall impact of the sector on business activity across the state and found that it directly or indirectly supports about one of every six Texas jobs.
We used models and systems I developed decades ago and have maintained and updated since that time to measure the total economic impact of the energy sector, including all of the ripple effects through the supply chain and the consumer spending effects.
Texas has developed a deep network of suppliers to the industry, which enhances its importance. In addition, benefits flow throughout the economy, with opportunities across a broad spectrum of industries. In fact, our analysis showed gains in more than 400 sectors of the economy (in other words, just about everything).
The current total annual economic benefits of the Texas energy sector (oil and natural gas exploration and production as well as related industries) is estimated to include Total Expenditures of $557.4 billion, Gross Product of $198.8 billion, and Personal Income of $120.6 billion, as well as more than 1.9 million jobs (including multiplier effects). Tremendous growth in the industry is expected to increase the economic benefits over time.
Production has risen sharply in recent years, up about 500% since 2010. This expansion began after decades of decline and talk of “peak oil” and the effective end of the industry. New recovery methods have led to oil being extracted in areas where it was previously not thought to be possible, and lower costs and higher recovery rates are helping to reduce the cyclical nature of the industry.
Increased production levels have led to a reduction in the need for imports. In fact, there is now a surplus of U.S. crude as domestic demand for fuels and other refined products is not growing nearly as rapidly as production. Virtually all of the “new” petroleum will be exported in some crude or refined form. Massive investments are occurring in pipelines, storage facilities, port and shipping capacity, and other key industry elements to transport the oil and gas to foreign markets where it is desperately needed. U.S. exports of liquefied natural gas (LNG) are also rising.
Growth in production in the Permian Basin and other parts of Texas is creating a global transformation of petroleum markets. The available, economically feasible supply at this point might well extend for centuries into the future. For Texas, this amazing resource will continue to fuel (pun intended) economic expansion and opportunity.
M. Ray Perryman is president and CEO of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.