Published: February 27, 2009 08:28 pm      

Oil, natural gas industry continues its impact on state

EDMOND — With names like Phillips Petroleum, Continental Oil and Kerr-McGee, it is clear that energy has played a storied role in Oklahoma’s past. With names like Williams Companies, Devon and Chesapeake it is clear that energy remains important to Oklahoma today. But just how important is it?

This week, the University of Central Oklahoma Policy Institute (www.uco.edu/ucopi), a nonpartisan public policy think tank housed at the UCO released a new report (full disclosure: I authored the report) that quantifies the economic impact of this industry. The report notes that the true impact of the oil and natural gas industry extends far beyond the industry itself. In fact every industry in Oklahoma benefits from the presence of the oil and natural gas industry here.

Data from the U.S. Bureau of Economic Analysis indicates that the oil and natural gas industry in Oklahoma contributes $19.7 billion to the state’s Gross State Product and employs 75,000 people. This data however, does not include the indirect effect the industry has on the economy. In order to produce oil and natural gas, firms rely upon suppliers to provide machinery, tools and even construction services. Consequently, those firms hire more workers, too. Furthermore, by stimulating so much investment and employment, the oil and gas industry along with their suppliers, stimulates consumption, production and employment in all other industries as well.

The UCO Policy Institute report finds that once one considers both the direct and indirect effects, the oil and natural gas actually adds $30 billion to our state’s Gross State Product, supports 267,000 jobs and increases Okla-homa personal income by $15.6 billion — or an average of $4,400 per person. But the impact is even more significant once one considers the type of jobs created by this industry. According to the report, 35 percent of the jobs in Oklahoma’s construction industry are supported, either directly or indirectly, by the oil and gas industry. Further-more, the industry is responsible for supporting the employment of 25 percent of our state’s scientists, 20 percent of our state’s mathematicians/engineers, 15 percent of our state’s lawyers, and 13 percent of our state’s business professionals such as accountants, financial analysts, etc.

Once one examines where these jobs fit in the income distribution one realizes that the oil and natural gas industry is having its most significant impact supporting middle-income, and upper-middle-income families. In fact, the report finds that 35 percent of the compensation for upper-middle-income workers in Oklahoma is connected (again directly or indirectly) with the oil and natural gas industry.

Some might think that our state’s obvious reliance on the energy industry means our state should oppose environmentally friendly policies. Yet, such a belief indicates a misunderstanding of the Oklahoma energy industry today. It turns out that the oil and natural gas industry today is more a natural gas industry than oil industry. It is natural gas that is leading our state economy today, and it is natural gas that will be meeting our nation’s energy needs tomorrow.

Most Americans power their automobiles with gasoline. Yet, compressed natural gas is a much cleaner automobile fuel than gasoline is, and 98 percent of the natural gas we consume in this nation is produced in North America. In other words, natural gas offers a cleaner, more domestic fuel source than oil.

About 50 percent of the electricity we produce in the nation — and in Oklahoma — comes from coal. Yet natural gas produces only one-half the carbon dioxide as coal. If our nation wants to get serious about protecting our environment, it is clear that we will need to become even more reliant upon natural gas.

As a fourth generation Oklahoman I am proud of our state’s energy past. As a parent of two young children I am even more excited about our state’s energy future. This is because as an economist, I know that Oklahoma’s natural gas industry will continue to have a beneficial impact on Oklahoma and the rest of the nation.

MICKEY HEPNER is an associate professor of economics at the University of Central Oklahoma.