Economic impact of the oil and gas industry

Alma L. Figueroa
Oil And Gas In Texas: The Impact Of Fuel On The Economy

Oil and gas companies are part of the largest industry in the United States. The oil and gas industry is responsible for creating 10.3 million jobs for Americans, which spurs economic growth. America’s oil and gas industry provides 80% of the country’s energy needs., contributing to 8% of the GDP. The oil industry is rated 1st in the world in terms of both oil production as well as oil consumption, with large amounts of crude oil products being refined into petroleum products daily. Consumer view is a good way to get a better understanding of the needs of the consumers, and in this way adapt to need and supply the demand.

Each day, the oil and gas industry pays tens of millions of dollars to the federal treasury in the form of rents, royalties, bonus payment and income tax payments. This revenue is vital in supporting the creation and maintenance of public infrastructure such as hospitals and schools. With a tax rate of 34%, the industry is a tremendous source of public revenue. The industry does not receive any tax credits or deductions and receive zero taxpayer funded support.

Oil and gas companies are also one of the highest paying industries in the world, with the average salary being almost 85% higher than the average private sector salary in America. This in turn creates more revenue for the state in the form of taxes. Salaries are also used to purchase goods, driving the demand for more goods and services, which in turn creates a need for more production facilities to create those goods.

Due to the massive supply of oil and gas products, energy costs are lower and support private sector investment by providing the country with billions of dollars to use in new manufacturing. This results in the creation of more jobs, an increase in infrastructure and growth in the economy. More jobs mean more taxes, which boosts the public revenue. Oil companies produce on average 14.8 million barrels of crude oil per day, whilst gas companies produce 91.4 billion cubic feet of natural gas per day. The current price of crude oil is $74.56 per barrel of oil. With a consumption rate of 19.7 million barrels per day, the revenue generated from the sale of this oil is astronomical.

Oil and gas companies are capital intensive, and devote the largest share of their earnings into the production of new property, plants and equipment to the industries operations. Capital intensive refers to industries that require larger investment, and would therefore have a higher percentage of fixed assets such as plants, property, etc. This adds value for shareholders, and they, too, will get a return on their investment. Better returns means more shareholders, and an even larger revenue being generated by shareholder purchases. While the revenues are large, so are the costs of providing consumers with energy and keeping up with demand. The oil and gas industry is constantly changing, making new innovations and coming up with new advancements in the way they produce oil and natural gas.

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