Our Thoughts

Why Should You Care If Oil Prices Crash?

By: Larry D. Adams, CPFA, AIF 

I will be the first to admit that I am biased when it comes to the oil and gas industry. Having lived in West Texas my whole life, specifically, in the middle of the Permian Basin, where 20 percent of the U.S.’s oil and 7 percent of the U.S.’s natural gas is produced. A place where, regardless of your occupation, you’re involved in the oil business even if you’re not.  It is what drives our economy. 

So, why should those who don’t live in an oil-producing state care about the oil and gas industry? The majority of America may not understand the impact oil & gas producers have on the U.S. economy. 

Employment Driver 

According to the 2019 U.S. Energy and Employment Report, the U.S. Oil and Natural Gas Industry supports 10.3 million full and part-time jobs through direct employment and indirect support to other sectors. Research also shows that for every direct natural gas and oil job, an additional 2.7 jobs are supported elsewhere in the economy. These jobs make up 5.6 percent of the nation’s total employment. 

Economy Driver 

In addition to well-paying jobs, in 2019, the industry contributed an estimated 1.3 trillion dollars to the U.S. economy. That is 7.6 percent of the U.S.’s GDP. This economic impact is a result of wages, taxes, capital investments, and collaboration with other industries. The gains from the industry don’t only benefit the traditional natural gas and oil-producing states, but rather the whole country. 

Why is it Important that the U.S. be Energy Self-Sufficient?

To answer that question, one only needs to remember the year 1973.  Now, I know 1973 was a long time ago, and most of you reading this are probably too young to know or remember it, but I remember it like it was yesterday. The year started with such promise. My wife, Carolyn, and I were married in April of that year. Newlyweds, we were completely oblivious as to what was going on in the world. However, we soon got a dose of reality. 

In April 1973, the average price of a barrel of oil was $4.75 ($27.61 today). A gallon of gasoline cost 39 cents ($2.27 today). In October 1973, OPEC ministers were meeting in Vienna when Egypt and Syria (non-OPEC nations) launched a joint attack on Israel. 

After initial losses in the so-called Yom Kippur War, Israel began beating back the Arab gains with the help of a U.S. airlift of arms and other military assistance from the Netherlands and Denmark. By October 17, the tide had turned decisively against Egypt and Syria, and OPEC decided to use oil price increases as a political weapon against Israel and its allies. The price of oil increased by 70 percent. At OPEC’s Tehran conference in December, oil prices raised another 130 percent, and a total oil embargo was imposed on the United States, the Netherlands, and Denmark. 

gas station linesEventually, the price of oil quadrupled, causing a major energy crisis in the United States and Europe that included price gouging, gas shortages, rationing, and long lines at the pump. Just finding a gas station that had gas was a challenge. I don’t think anyone who experienced the crisis of that year ever wants to see it repeat itself. 

What Would Life be like Without Oil and Natural Gas?

Have you ever given that question any thought? Without oil and gas, manufacturing companies could not produce, planes could not fly, ships could not sail the seas, cars could not run, farmers could not grow crops, and tech companies would not have the plastics to make those fancy phones or computers that we love and use to help run our businesses and daily lives. Not to mention that most of the things we use in our daily lives, from makeup to the shoes on our feet, are made from by-products of oil or gas. 

I believe the United States would not be the world’s most prosperous nation in history were it not for the oil and gas industry. Companies take substantial financial risk, and oil field workers risk physical harm every day to provide the energy that fuels our nation. I’m not discounting that America’s great ingenuity would not have found another way if oil and gas had never been discovered. But the reality is that oil and gas were discovered, and as of today, another source hasn’t. At least not one that can be produced in an abundant, sustainable, and cost-effective way. 

Common Misconceptions 

Sadly, some have celebrated the recent oil crash. Some believe that the industry is evil and out to destroy the planet. The reality is that the industry has spent millions of dollars to find new technology to make extracting oil and gas safer, more efficient, and friendlier to our environment. 

Another misconception is that the U.S. oil and gas industry is made up of only large multinational conglomerates. The reality is that much of the oil and gas produced in the U.S. comes from small independent companies started by entrepreneurs. 

I believe the oil and gas industry is a vital partner in securing our national security, made up of hard-working Americans who love and care for our great nation.