•  
  •  
  •  
  •  
  •  
  • Untitled Document
    Untitled Document

    CERA report says energy can drive economic engine

    OGFJ Editors

    Having proved resilient throughout the Great Recession compared to other sectors, the energy industry has the potential to be a key engine of economic growth and recovery, according to a new study by IHS Cambridge Energy Research Associates (IHS CERA) and the World Economic Forum. The findings of the study were presented March 7 at CERAWeek 2012 in Houston.

    The report, “Energy Vision 2012: Energy for Economic Growth,” provides a framework for understanding the larger economic role of the energy industry at a time when issues of employment and investment are so critical in a troubled global economy. The report examines the industry’s role as a driver of investment and job creation as well as energy’s importance as the key input for most goods and services in the economy.

    “The energy industry is unique in its economic importance,” IHS CERA Chairman and Pulitzer Prize-winning author, Daniel Yergin said. “The energy sector has the potential to be a tremendous economic catalyst and source of innovation in its own right, while it simultaneously produces the very lifeblood that drives the broader economy.”

    The energy industry—by nature capital intensive and requiring high levels of investment—has the ability to generate outsize contributions to gross domestic product (GDP) growth, the study says. In the United States, the oil and gas extraction sector grew at a rate of 4.5% in 2011 compared to an overall GDP growth rate of 1.7%.

    The highly-skilled technical nature of energy industry jobs is reflected in compensation levels. As a result, employees of the energy industry contribute more absolute spending per capita to the economy than the average worker and contribute a larger share of GDP per worker than most industries.

    The energy industry’s most important immediate source of economic potential is its high “employment multiplier effect” that is a result of its extensive supply chain and relatively high worker pay. Every direct job created in the oil, natural gas and related industries in the United States generates three or more indirect and induced jobs across the economy, the study says. This places oil and gas ahead of the US financial, telecommunications, software and non-residential construction sectors in terms of the additional employment associated with each direct worker.

    “We always suspected that energy had a vital role to play in the economic recovery,” said Roberto Bocca, senior director, Head of Energy Industries, World Economic Forum. “But we were still surprised when the data uncovered the magnitude of the sector’s multiplier effects.”

    The report also examines the role of energy prices in the economy. As the key input for most goods and services in the economy, lower energy prices reduce expenses for consumers and businesses and increase the disposable income available to be spent elsewhere.

    Many countries, such as China, India, and South Korea, are increasingly focusing on renewable energy sources as potential growth sectors for their economies. Developed countries are also investing in renewables in an effort to meet sustainability goals and emerge at the forefront of this growing sector. However, the higher costs of these technologies create tradeoffs that must be considered, the study says.

    “One must look at energy’s contribution to the overall economy, not just its direct contribution,” said Samantha Gross, IHS CERA director, Integrated Research. “Maximizing direct jobs in the energy sector may not be the right goal if it reduces efficiency and increases energy prices to the detriment of the economy’s overall productivity.”

    “Energy Vision 2012” also examines the role of policy in maximizing the economic benefits of energy production and the promotion of steady and reasonable energy prices through stable tax and fiscal schemes and the encouragement of industrial diversification through cluster development.  It points to the challenge for resource-rich country to transform oil and gas earning into the foundations of a wider, more diversified economy.

    Related Articles

    Top oil and gas discoveries of 2013

    01/07/2014

    While further appraisal is necessary, add ten more oil and gas prospects to the list of potential commercial discoveries.

    Aker Solutions acquires Managed Pressure Operations

    03/08/2013 Managed Pressure Operations International Ltd. (MPO), an oilfield services and technology company with locations in Singapore, Dubai, Houston, and Indonesia, said March 8 that it has been acquired ...

    Total Energy USA taps Shell's Dick Williams as chair

    03/06/2013

    Total Energy USA management said March 6 that it has named Dick Williams, president of Shell WindEnergy Inc., as chair of its executive committee.

    Baker Botts LLP grows with ILG-Kuwait alliance

    03/06/2013 Global energy law firm Baker Botts LLP continued its expansion in the Middle East by entering into an alliance with the International Legal Group (ILG) of Kuwait. This is the firm’s first foray int...

    BREAKING NEWS Marine vessel collides with Swift Energy well in Louisiana, company working on leak containment

    02/27/2013 Houston-based Swift Energy Co. is working to control a shut-in well that was struck by a marine vessel at its Lake Washington field in Plaquemines Parish, La., at about 7 pm CST on Tuesday, Feb. 26...

    More Oil & Gas Financial Articles

    Top oil and gas discoveries of 2013

    Tue, Jan 7, 2014

    While further appraisal is necessary, add ten more oil and gas prospects to the list of potential commercial discoveries.

    Aker Solutions acquires Managed Pressure Operations

    Fri, Mar 8, 2013

    Managed Pressure Operations International Ltd. (MPO), an oilfield services and technology company with locations in Singapore, Dubai, Houston, and Indonesia, said March 8 that it has been acquired by Aker Solutions, a global oilfield services provider.

    Total Energy USA taps Shell's Dick Williams as chair

    Wed, Mar 6, 2013

    Total Energy USA management said March 6 that it has named Dick Williams, president of Shell WindEnergy Inc., as chair of its executive committee.

    Baker Botts LLP grows with ILG-Kuwait alliance

    Wed, Mar 6, 2013

    Global energy law firm Baker Botts LLP continued its expansion in the Middle East by entering into an alliance with the International Legal Group (ILG) of Kuwait. This is the firm’s first foray into Kuwait, a country with a significant strategic role in the region. The move was announced on March 6.

    BREAKING NEWS Marine vessel collides with Swift Energy well in Louisiana, company working on leak containment

    Wed, Feb 27, 2013

    Houston-based Swift Energy Co. is working to control a shut-in well that was struck by a marine vessel at its Lake Washington field in Plaquemines Parish, La., at about 7 pm CST on Tuesday, Feb. 26. The collision damaged teh wellhead and resulted in an outflow of water, oil, and natural gas into the lake.

    Most Popular

    Oil & Gas Jobs

    Search More Job Listings >>
    Subscribe to OGFJ