Unconventional oil and gas boom benefits felt across nationwide supply chain
September 25, 2014 | By
Barbara Vergetis Lundin
The economic benefits from unconventional U.S. oil and gas development being felt by a diverse group of industries that support oil and gas producers, supply chain industries like steel pipe manufacturers, construction, railcars, sand and gravel producers, and professional and technical labor, according to a new study by IHS. Employment related to unconventional oil and gas production in these supply chain industries totaled 524,000 jobs in 2012 and is forecast by IHS to grow 45 percent to 757,000 jobs in 2025 -- equivalent to 41 percent of total direct and indirect employment supported by unconventional oil and gas value chain activity. In addition to jobs supported, the study finds that supply chain industries will contribute more than $16 billion in government revenues in 2015 -- up from $13 billion in 2012 -- and rise to about $23 billion in 2025. IHS predicts total gross output from this group of industries to grow from $145.7 billion in 2012 to $205.9 billion in 2025, contributing the equivalent of nearly one half a percent total U.S. gross output each year. Total labor income generated by employment in these industries is expected to reach nearly $60 billion in 2025, up from $41 billion in 2012, according to IHS, with the average income per employee at about $79,000 over the course of the study, exceeding the average annual U.S. wage of $68,000. "It is an important part of the story that the unconventional oil and gas producers sit atop long and diverse supply chains that run through the U.S. economy," said Brendan O'Neil, managing director, consulting, IHS Economics and Country Risk. "The growth in unconventional production has become an important source of economic activity for these industries at a time when many of their other primary markets were experiencing decline as a result of the Great Recession." The IHS study finds that these supply chain benefits are being felt by industries located in states with and without unconventional oil and gas production. Not surprisingly, unconventional oil-and gas-producing states experience a larger portion of supply chain economic activity, however, a sizable portion also occurs in non-producing states in industries like steel-making, machine tool manufacturing and sand and gravel production. Jobs supported by supply chain activity in producing states were nearly 460,000 in 2012 and are expected by IHS to increase to 630,000 jobs in 2025, with construction and support activities for oil and gas operations being the highest source of employment. Total employment contributions for non-producing states are expected to rise from 64,000 jobs in 2012 to 127,000 in 2025, with the capital goods sector contributing the most jobs for those states. IHS also examined the impact of unconventional production on supplemental construction --infrastructure, housing, commercial and industrial building activity -- that occurs in addition to direct spending by oil and gas operators. The cumulative impact of supplemental construction spending is expected to total more than $49 billion through 2025, supporting an annual average of 12,300 jobs during that period, according to IHS, while supplemental construction for housing will have the largest impact, representing nearly $3 billion in 2014 spending and peaking at more than $5 billion in 2021. For more: © 2014 FierceMarkets, a division of Questex Media Group LLC. All rights reserved. |