Oil and Gas Industry Job Numbers Don’t Add Up

Wednesday, April 20, 2011

The Facts about the Questionable Oil and Natural Gas Job Claims

Despite claims to the contrary, the U.S. oil and natural gas industry does NOT employ 9.2 million workers.  Economic Impact Analysis (EIA) is an attempt by economists to estimate the direct, indirect and induced jobs generated from marginal changes in investments and public policies.  Input-output models, commonly used for EIA, should only be used for marginal analysis and are not really appropriate for assessing the economic contribution of an entire industry – like the oil and gas industry. 

Unfortunately, Congress and the general public remain unaware of this limitation, nor are they aware of the potential errors and questionable assumptions used by consultants to generate the desired results for their industry clients. We continue to see stories with erroneous job claims, but the True Grit is that the numbers speak for themselves.

Professor John Crompton, in a 2006 article titled “Economic Impact Studies: Instruments for Political Shenanigans” noted the following:

”A consulting organization that fails to deliver the economic-impact (i.e. jobs) numbers that its client expects is unlikely to receive either repeat business from that client or new commissions from others.  The motive of sponsors frequently is to seek proof to support an established position, and clients expect to get what they pay for!”

API job numbers compared to job data

This brings us to the questionable job claims from the oil and natural gas industry. According to U.S. Bureau of Economic Analysis data from 2009, the drilling and production of oil and natural gas directly generates 799,100 jobs, not 9.2 million.  If we generously expand the direct jobs to include all of the mining (including oil and gas) support jobs, the total increases to 1.12 million jobs – representing less than 1 percent of total U.S. jobs.

U.S. Department of Labor 2007 statistics indicate the drilling and production of oil and natural gas, plus support activities directly account for 425,025 jobs.  If we further expand direct oil and gas jobs to include questionable sectors such as oil refineries and natural gas distribution, the total increases to 743,825 jobs, not 9.2 million jobs.  

The actual oil and gas industry report estimated 2.1 million direct jobs with 7.1 million indirect and induced jobs.  Check it out yourself in Tables 4 and 6 of this report. One of the reasons the direct jobs are nearly twice our estimates is because industry erroneously included several sectors such as gas stations and convenience stores as direct oil and gas jobs.   In total over half of the direct “oil and gas” jobs should not have been claimed in the first place.

Not all jobs claimed by the oil and gas industry are high-paying jobs with good benefits. Gas station attendants and convenience store clerks typically earn low wages with few benefits. Millions of the “oil and gas jobs” are located in the diverse service sector, where some jobs have high wages while others pay lower wages.

The truth is that 9.2 million jobs ARE NOT at risk from the Department of Interior taking a closer look at how to manage our public lands. There is no factual basis for statements issued about potential job loss.  In reality, oil will still flow in the global marketplace, and retail stores and gas stations won’t close if we protect the environment.  Protecting the environment and economic development are not mutually exclusive. We can do both while not negatively impacting jobs.

Check out this great article on the recent Headwaters Report on oil and gas industry jobs as well.

Listen to Ph.D. Economist Pete Morton with The Wilderness Society talk more about this issue here


A Few Questions to Ponder:

  1. Wouldn’t a focus on the direct jobs from an industry a better indicator of the contribution of the industry to the U.S. economy?
     
  2. Isn’t it misleading for the oil and gas industry to claim they
    employ 9.2 million oil and gas workers when more than half of
    the estimated jobs are actually in the retail and service sector?
     
  3. Why would the oil and gas industry claim that all of the 9.2
    million jobs are high paying, when in fact more than half of the
    jobs are in the low wage retail and mixed wage service sectors?
     
  4. Why would members of Congress claim that 9.2 million jobs
    would be lost if the Obama Administration protects the environment– when such claims are not supported by years of research by academic and agency economists?

Download the PDF version of the fact sheet
Related graphic
Related audio file