U.S. employers added only 18,000 jobs last month — a remarkably low figure that contributed to the increase in unemployment to 9.2 percent. That’s the bad news. Fortunately for American workers, the future is bright, but only if regulators in Washington, D.C., get out of the way.
A new study from the respected IHS Cambridge Energy Research Associates and IHS Global Insight reveals that the offshore oil and gas industry on its own could produce more jobs per month next year than the 18,000 that were created by all U.S. employers in June.
Nearly 230,000 jobs in total — an amount that exceeds the size of General Motors — are forecast for 2012 if the pace of offshore energy development and permitting increases. Those jobs aren’t just in the Gulf of Mexico region; one-third of them are in cities and towns across America.
“Jobs, deficit, economy — words you’re certain to hear echoing through the Capitol this month,” said Sen. David Vitter (R-LA) in response to the study. “Yet as debt debates and negotiations continue, too few are talking about one clear step that could help create jobs immediately: allowing our energy industry to get back to work.”
Those new jobs bring added benefits as well. The study projects more production would pump $44 billion into the U.S. economy and provide nearly $12 billion in tax and royalty revenues for state and federal treasuries. That money could go a long way to balance budgets in more than a few state capitals.
The increased production would also reduce America’s dependence on foreign oil. An additional 150 million barrels could be produced next year with a streamlined process in Washington. That’s five times the size of Obama’s release from the Strategic Petroleum Reserve last month.
The study follows other recent reports on the potential for job creation from increased activity in the Gulf. Its numbers tell a significant story because unlike some studies of economic impacts, this one measures the net creation of jobs and income.
Studies that simply measure the cascade of expenditure from, say, the government to contractors to suppliers and then to the butcher, the baker, etc., ignore the offsetting losses from the cascade of expenditures not made when the government taxes or borrows the money in the first place. The IHS Global Insight macroeconomic model accounts for all flows, both positive and negative, that result from the policy. Equally noteworthy is that the policy recommendations do not require government spending; instead they add to government revenues, at all levels, without raising tax rates.
Following last year’s oil spill and the subsequent moratorium imposed by the Obama administration, regulators have dramatically slowed the amount of work taking place in the Gulf.
Already, 10 drilling rigs, which is more than one-third of the fleet, have left the Gulf of Mexico. New exploration, which impacts oil supply in seven to 10 years, isn’t happening at a pace to keep up with demand. And the amount of time it’s taking the Obama administration to approve drilling plans and permits is glacially slow.
Using the government’s own data, the study reveals the number of drilling plans pending at the Bureau of Ocean Energy Management, Regulation and Enforcement increased by 90 percent. The government is now taking 131 days to approve them, compared to 36 days before the moratorium.
The longer it takes for the federal government to approve those plans, the less likely businesses are to add jobs. The study’s underlying message: regulatory congestion in Washington is threatening job creation across America.
David Kreutzer, research fellow in energy economics and climate change at Heritage’s Center for Data Analysis, contributed to this report.