Employment in Oil & Gas Drilling
I regularly see right wingers and republicans claiming that we should allow unlimited oil and gas drilling because it would create so many jobs.
If you look at the recent data on growth in employment in oil & gas drilling it appears they may have a good argument. Over the past year employment in oil & gas drilling rose 11.3%, only down slightly from its January peak of 14.5%. Employment growth in the sector almost reached its 1980 peak growth rate of 16.5 %.
In March, oil & gas extraction employed some 193,000 people. Assume the optimists are right and that over the next 8 years oil & gas extraction employment will grow at near record annual rate of 12.5%. By 2020 this sector’s employment would reach some 470,000 — more than double current levels.
To put this in perspective, assume continued sluggish economic growth of some 2% to 3% real GDP growth and annual employment growth of around 1.6%. . By 2020 this would bring the unemployment rate under 5%.
Currently, oil & gas exploration employment is some 0.15% of total payroll employment. That is correct, zero point fifteen percent, not fifteen percent. Under the assumed sluggish growth scenaro
oil & gas employment would reach a new record share of 0.32%f of payroll employment in 2020.. The some 289,000 increase in oil & gas extraction employment would account for about 1.6% of the total employment gains.
It is like last years record real GDP growth in North Dakota. Because of the oil boom in 2011 real GDP
grew 7.5% in North Dakota, far stronger than any state. This very rapid growth caused North Dakota’s share of total US real GDP to rise from 0.24% to 0.26%
So even if you allow them to have their extremely optimistic assumptions, unlimited oil & gas extraction is unlikely to have a significant impact on total employment growth.
I think these days, the big controversy over oil-and-gas-related employment creation concerns the Keystone pipeline—that is, how much employment the construction of it would create, and how long those jobs would last—rather than whether allowing further oil drilling in this country would create a lot more jobs in the drilling business, although more drilling in Arctic Alaska (Alaska’s unemployment already is low) and in the Gulf of Mexico would provide some jobs, but not all that many, I wouldn’t think.
the numbers that were bantered around by the right wing talkers were that the pipeline would employ range from 20,000, which was the number claimed by pipeline’s owner TransCanada, to more than 250,000 jobs claimed by the US Chamber of Commerce…putting aside the obvious contradiction voiced by those who say government spending on infrastructure doesnt create jobs but oil pipeline company spending on infrastructure does, an earlier study on jobs created by the construction of the keystone pipeline by the Cornell University Global Labor Institute (40 pp pdf) indicated there would only be between 500 and 1400 temporary construction jobs for americans, & only 50 full time long term jobs, because the other jobs would be taken by those canadians already employed by TransCanada, the company that will be building the pipeline…
that said, the US has already harvested all the low hanging fruit from oil & gas extraction; we cant put a drill in the ground & walk away & have it produce oil for forty years anymore…it costs us more energy up front and more employs more people to get each barrel out now than it ever did, especially for fracked fields..decline rates in horizontal fracking are measured in weeks and months instead of years…”to keep the decline rates from mucking up income statements, companies have to drill more and more, with new wells making up for the declining production of old wells” and thus employment in the gas & oil patch will continue to rise relative to the numbers once employed in the industry…
Not even the industry projects growth so high as Spencer’s optimistic scenario. Indeed, iirc, today’s FT noted that an Industry Survey expects to add about 100K jobs over that time–notably including the service-industry gigs to support those workers.
And all at the minor cost of a few earthquakes and non-potable “drinking” water.
Well there’s the real issue. There is no such thing as a policy without costs. If the issue were only between a tiny increase in employment and a modest increase in employment, who cares? There’s no reason to say no to a project that produce a few jobs, if there is no cost to the project.
The problem is that there are costs, and to offset the costs, benefits need to be substantial. When you see benefits inflated they way they have been in the fracking debate, you have to wonder whether the actual cost/benefit trade-off isn’t really terrible.
Course, the GOP has trained itself into knee-jerk “job creation” response to everything, so maybe I’m being too suspicious about the cost/benefit balance in this case. The real problem is that the GOP has been anti-labor for as long as I can remember, and is now anti-growth as long as Obama is in the White House. Saying “job, job, job” is propaganda of the “big lie” variety.
True. I thought the focus of the post was on a debate about the number of jobs drilling creates, not on whether we should allow unlimited drilling because of an undisputed number of jobs drilling would create, but I think I misread the post.
just to clarify, im not advocating “unlimited drilling”, or any drilling for that matter; i was just trying to explain the realities of our current methods of energy extraction as it relates to employment, ie, what the post was about…i’d just as soon see a moratorium on most fracking operations until we get a clearer picture of what damage might eventually be done to aquifers and or the bedrock; as and far as oil extraction goes, i’m on record advocating that we drain america last, simply because as oil becomes scarcer &/or more difficult to exploit it can only become more valuable; hence we should import what we can now get relatively cheap in exchange for our fiat currency, and leave our own oil resources in the ground, where they’ll accrue value faster than any other investment we could make..
The thing you do not see in the debate about fracking is the cost.
The marginal cost of bring new oil on line is approaching $100/bbl.
Historically drilling is a function of the price of oil.
As I was doing these projection I was thinking what it implied about the price of oil.
I suspect that to get 10% to 15% annual increases in drilling would require similar annual oil price increases.
Peak oil does not necessarily mean that oil output will fall. Rather what it means that it will take ever
higher prices to bring the marginal barrel of oil online.
While it is true that the oil and gas industry provides employment to several hundred people, I don’t think it makes sense to invest in drilling operations, without doing adequate research. This is because drilling operations causes a harmful effect on the environment and affects the ecological balance in the surrounding area as well.