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Energy’s multiplier effect: Oil and natural gas created 9% of new U.S. jobs in 2011

The U.S. oil and natural gas industry helps power Americans’ engines through the fuels it produces. But a new report from the World Economic Forum shows the industry is driving U.S. job creation as well.

According to the report, prepared in partnership with IHS-CERA, oil and natural gas production accounted for 9 percent of new U.S. jobs last year.

Nine percent. That’s nearly one of every 10 new American jobs in 2011 – each created as a result of the development of America’s oil and natural gas resources.

Even one of the report’s authors was surprised.

“We always suspected that energy had a vital role to play in the economic recovery,” said Roberto Bocca, head of energy industries at the World Economic Forum, “but we were still surprised when the data uncovered the magnitude of the sector’s multiplier effects.”

Here are the details from the report, which highlighted the role that energy development can play in reviving the global economy:

  • In 2011, there were 37,000 new jobs created directly in the United States from oil and natural gas extraction.
  • This, in turn, drove the creation of another 111,000 U.S. jobs related to industries that supply the energy industry with goods and services.
  • In other words, for every one new job in the U.S. oil and gas industry, three more new U.S. jobs were created elsewhere.

As the report shows, the jobs-multiplier effect of U.S. oil and natural gas activity is higher than that of many other American industries, including the financial, telecommunications, software and non-residential construction sectors. This is the result of the energy industry’s long supply chains and relatively high levels of spending by employees and suppliers.

“Energy should be seen as an enabler of job creation in the wider economic system,” Bocca said.

While others may be surprised by this finding, some recent college graduates are not. A story I heard yesterday morning on National Public Radio highlights the demand for petroleum engineers coming right out of college with the skills to develop the nation’s vast shale natural gas and tight oil resources. Their average starting salary? $79,000 a year.

“If you would have told me 10 years ago that a shale would have been a gas reserve, I would have gone, ‘You’re crazy.’ But they found a way to do it,” a professor at the Colorado School of Mines told NPR. “So we’ve got the technology improving; we’ve got these new reserves opening up; we’ve got this crew change coming up – all of these things have conspired to require people.”

As it turns out, this technological transformation requires a significant amount of people. “Unconventional” oil and natural gas production – which barely existed a decade ago – employs more than 1.3 million Americans. According to the report, the shale gas industry alone employs 600,000 people in the United States. An additional 400,000 are employed in the production of tight gas and coal seam gas, and another 350,000 in unconventional oil extraction.

I know I’ve said it before, but with additional access to the nation’s energy resources – and responsible development of them – U.S. energy production could be an even bigger engine of job and economic growth.

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