America's Shale Boom Is A Major Job Creator

Silicon Valley may get better press, but in this period of dismal employment growth it’s the oft-maligned hydrocarbon sector that’s creating more jobs faster.

The oil and gas boom is producing millions of jobs, and not just where you might expect. Employment is up 40% in the oil and gas fields since the recession began in late 2007. But in every one of the 10 states where hydrocarbon production is on the rise, overall employment growth has outperformed the nation.

These jobs, moreover, are "sticky" — anchored in the local economy and ranging from information services to training, health care, housing, education and related manufacturing.

The gains have emerged from a profound change in the energy landscape. Since the recession officially ended in mid-2009, U.S. oil production has risen 60%, bringing about a 50% collapse in oil imports.

Besides reducing the GDP-robbing trade deficit, this has had the immediate impact of creating hundreds of billions of dollars in new economic value.

The boom has also attracted a similar scale of new foreign direct investment. Because of low-cost energy abundance, 100 factories are set to come on line by 2017. When all are up and running, another $300 billion will be pumped into GDP and 1 million more jobs created.

This is proof that economic stimulus — of the right kind — works. Unlike the stimulus undertaken by the Obama administration, this one is coming at no cost to taxpayers, has been fueled by private-sector investment, and has taken place entirely on state and private lands.

From fuels and chemicals to fertilizer and energy-centric products of all kinds, the hydrocarbon stimulus is creating middle-class jobs and generating tax revenues, not burdens.

Why not provide incentives to get even more of this? Some have argued that doing so would benefit only Big Oil. But the facts tell otherwise.

Over 75% of America’s oil and gas production comes from some 20,000 companies — the same ones responsible for nearly all the recent growth in output. These small and midsize companies, and thousands more in the supply chain, are deploying the smart-drilling technologies that, along with hydraulic fracturing, have unlocked hydrocarbon-rich shale fields.

America has long held a fondness for small businesses, and for good reason. Over the past four decades, small firms of all kinds generated more than 60% of net new jobs.

Most Americans who do have jobs work in small businesses; mega-enterprises employ only about one-third. And when it comes to innovation, according to a 2012 Small Business Administration study, small businesses produce 16 times more patents per employee.

While we wait for Silicon Valley to spawn the next tech revolution — and it will — Washington should be figuring out how to get even more from the tech-driven oil and gas revolution. Fortunately, no new taxes or deficit spending are needed to do so.

For starters, let’s make sure new regulatory burdens don’t throw a wet blanket over the industry. Second, let’s open up new markets by encouraging the export of natural gas and crude oil anywhere private investors want to risk their capital. Next, lower the business-tax rate to unlock more domestic investment and accelerate the flow of foreign investment into energy-inspired factories.

Finally, we should open more federal land to production. This is essentially what Mexico is doing, reversing 75-year-old constitutional restrictions barring foreign companies from operating on Mexican federal lands. The motive? Stimulate economic growth and jobs.

If Congress were to make similarly big, bold moves, it would ignite a bull run of investment and "animal spirits" in the hydrocarbon sector and create economic ripple effects the likes of which we haven’t seen since the dot-com era.

"President Obama is committed to creating an environment where America’s small businesses — our engines of job-creation — can grow and prosper by supporting small business with new tax relief, favorable treatment of investments and rewards for hiring," says the White House. To that, we say amen.

This piece originally appeared in Investor's Business Daily

This piece originally appeared in Investor's Business Daily