Supply Chain Industries for Unconventional Oil and Gas Production Now Support More than 500,000 Jobs and Will Represent More Than 40 Percent of All Unconventional Oil and Gas-Related Jobs by 2025, New IHS Study Says
Providers of materials, capital goods, construction and well services, professional and other services and logistics represent a sizable portion of the economic activity generated by the unconventional oil and gas boom
"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."
WASHINGTON--(BUSINESS WIRE)--A sizable and growing portion of the economic benefits from
unconventional oil and gas development in the United States is being
felt by a diverse group of industries that support oil and gas
producers, according to a new study by IHS (NYSE: IHS), the leading
global source of information and analytics.
Employment related to unconventional oil and gas production in these
supply chain industries totaled 524,000 jobs in 2012 and is expected to
grow 45 percent to 757,000 jobs in 2025, equal to 41 percent of total
direct and indirect employment supported by unconventional oil and gas
value chain activity.
The study, Supplying the Unconventional Revolution: Sizing the
Unconventional Oil and Gas Supply Chain, is a comprehensive
assessment of the unconventional energy supply chain. It
continues IHS research on the economic contributions of unconventional
oil and gas activity that has increased U.S. oil production by 50
percent since 2008 and has played a major role in making the country the
world’s leading natural gas producer. Previous IHS studies in this area
examined the total economic contributions for all sectors involved in
the unconventional oil and gas activity—including direct, indirect and
induced jobs—in upstream, midstream, downstream energy and
energy-related chemicals. This latest study focuses solely on direct and
indirect contributions related to the specific supply chain industry
portion of that economic activity. The study measures across 56 North
American Industry Classification System (NAICS) sectors the economic
activity specific to those industries that directly and indirectly
support unconventional oil and gas activities in the upstream, midstream
and downstream segments of the energy value chain.
Examples of supply chain industries include manufacturers of steel pipe,
construction equipment, railcars, sand and gravel producers, and
professional and technical labor.
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
Total gross output from this group of industries is expected 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
Total labor income generated by employment in these industries is
expected to reach nearly $60 billion in 2025, up from $41 billion in
2012. The average income per employee is estimated to be about $79,000
over the course of the study, exceeding the average annual U.S. wage of
“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. Though unconventional oil-and gas-producing states
predictably experience a larger portion of supply chain economic
activity, a sizable portion also occurs in non-producing states in
industries such as steel-making, machine tool manufacturing and sand and
gravel production. The study notes that many of the supply chain sectors
analyzed maintain lengthy supply chains of their own, which adds further
to the economic impact.
Jobs supported by supply chain activity in producing states were nearly
460,000 in 2012 and are expected to increase to 630,000 jobs in 2025,
with construction and support activities for oil and gas operations
being the highest source of employment contributions. 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.
The study also examines 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.
Supplemental construction spending amounts to nearly $4 billion in 2014
and supports more than 15,000 workers. 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. Supplemental construction for housing will have the largest
impact, representing nearly $3 billion in 2014 spending and is expected
to peak at more than $5 billion in 2021.
“The supplemental construction spending driven by unconventional oil and
gas activity has had a major impact on the construction
industry—particularly residential construction—which was so hard hit by
the Great Recession,” O’Neil said. “In many ways the unconventional oil
and gas boom could not have come at a better time for the construction
About The Report Supplying the Unconventional Revolution:
Sizing the Unconventional Oil & Gas Supply Chain is the latest
iteration of IHS research on the “Unconventional Revolution” and sizes
the supply chain that supports upstream, midstream and downstream
activity across the lower 48 US states and 56 discrete supplier sectors.
Building on the original IHS research in the America’s New Energy
Future series, the latest study defines the different supply chain
sectors in terms of economic contributions to employment, gross output,
labor income and tax revenues resulting from unconventional oil and gas
production and investment. The most recent study also examines the
impact of unconventional oil and gas development on new construction of
infrastructure, industrial, commercial and residential buildings. This
research was supported by the Energy Equipment and Infrastructure
Alliance, which represents members that provide equipment, materials,
construction, services, logistics and workers to unconventional oil and
gas exploration, production, transportation and processing. IHS is
exclusively responsible for all of the analysis and content.
Download the complete report and methodology: Supplying the
Unconventional Revolution: Sizing the Unconventional Oil and Gas Supply
Chain is available at www.ihs.com/shalesupplychain.
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