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ISSUE: Overview of the Oil and Natural Gas Industry The U.S. oil and natural gas industry is vast oil and natural gas resources to work the backbone of this nation’s economy. for the benefit of this nation. The oil and According to the latest available data, natural gas the oil and natural gas industry supports The U.S. needs a balanced energy policy 5.9 million jobs – 1.8 million people that promotes energy efficiency, industry directly employed by the industry, with conservation and greater supplies of all supports 5.9 more than 4 million indirect jobs. The sources of energy, including the million jobs. oil and natural gas industry is massive production of domestic oil and natural and requires huge and often high-risk gas in an environmentally responsible investments. Its earnings contribute manner. This policy must not only greatly to the American economy and remove barriers to domestic oil and way of life and allow companies to natural gas production, but must also reinvest in the facilities, infrastructure create an environment that incentivizes and new technologies that keep America the creation of advanced energy going strong well into the future while technologies. History has shown that generating returns that will meet government mechanisms that interfere shareholders’ expectations. with market forces such as price controls, punitive taxes, and picking winners and Oil and natural gas development on losers among competing fuels have been federal lands, both onshore and unsuccessful and ultimately, consumers offshore, help our nation reduce its very often pay with increased prices at If we want to dependence on foreign sources and the pump. bolster the U.S. provides more revenue for the U.S. economy, create Treasury – helping pay for vital Global Energy Markets: Crude oil is a programs and reducing pressure on U.S. globally traded commodity, and natural jobs, and taxpayers. Oil and natural gas leasing gas is traded through a handful of enhance U.S. and development has generated more regional markets. As with any global than $200 billion since 1953 through commodity, the fundamental forces of bonus bids, royalties and lease rental supply and demand are the primary competitiveness, payments. drivers in determining their market price. strengthening There are also other factors that affect the U.S. energy The oil and gas industry is not immune price of crude oil and natural gas, development is to the current financial crisis and some including political instability in oil companies have had to reduce their producing regions of the world, weather crucial. investments; others have not. Time will related disruptions such as hurricane reveal the full impact of this crisis but activity in the Gulf of Mexico, and the the industry is accustomed to up-down decline in the U.S. dollar. cycles. According to the U.S. Energy Due to the financial crisis, urgent action Information Administration’s 2008 on all aspects of energy policy is more Annual Energy Outlook, U.S. total important than ever. U.S. energy primary energy consumption is expected development is crucial to any effort to to grow by 19 percent by 2030. Global bolster the U.S. economy, create jobs, energy demand is expected to increase 50 and enhance U.S. global percent in the same timeframe. World competitiveness. In recent months, the demand for oil has increased from 77 American people have made it clear million barrels per day in 2001 to 86 they favor greater access to America’s million barrels per day in 2007. By 2030, world petroleum demand is estimated to Overview of the Oil and Natural Gas Industry (cont’d) grow about 35 percent, to 112.5 million the oil and gas industry were barrels of oil equivalent per day. approximately 8.1 cents on each dollar of sales – a penny above the five-year Our economy depends on reliable supplies average for all U.S. manufacturing World demand of energy for jobs and manufacturing industries and equal to all U.S. for oil has growth, transportation of goods and manufacturing excluding the auto people, agriculture, and our nation’s industry. increased from security. The U.S. produces less than 40 77 million percent of the oil we consume; for the rest, Investment in the Future – barrels per day the U.S. relies on the global market. The Alternative Energy Resources : United States’ number one source of Between 2000 and 2007, the U.S. oil in 2001 to 86 imported crude is Canada. and natural gas industry invested an billion barrels estimated $121.4 billion in emerging per day in Despite significant growth of renewables energy technologies including 2007. and increases in energy efficiency, more renewables, such as solar, wind and than half of the world’s energy demand geothermal power, frontier will be met in 2030 by oil and natural gas, hydrocarbons, as well as shale oil and as is the case today. oil sands, and end-use technologies, such as fuel cells. This investment Who Owns Energy Companies? represents 65 percent of the total $188 Chances are you do. In fact, tens of billion spent by all of industry and the millions Americans have a stake in the federal government combined on U.S. oil and gas industry. According to a emerging energy technologies during 2007 U.S. study, only 1.5 percent of U.S. this time period. oil and natural gas company shares are owned by corporate management. This Moreover, publicly announced non- means that 98.5 percent of oil and natural hydrocarbon investment by the U.S. oil gas company shares are owned by and natural gas industry is estimated at The United individual investors, IRA accounts or $1.7 billion, representing five percent of other individual retirement accounts, the total investment approximately States alone pension funds, mutual funds and other $32.7 billion. The industry’s top consumes 20 firms, and institutional investors. investment is in wind with others made million barrels in solar, geothermal and landfill digester of oil and Industry Earnings – the Key to gas. Industry Investment: The oil and natural nearly 57 gas industry is large and capital-intensive. Serving as the Backbone of Our billion cubic It is critical that U.S.-based oil companies Economy: The oil and natural gas feet of natural have the capability to compete with state- industry reliably supplies the energy that supports our country’s economic gas each day. owned oil companies that are fully backed by government coffers. growth and sustainability. Through the creative use of new technologies and U.S.-based companies routinely invest innovative practices, this progress will billions of dollars each quarter into be attained in balance with consumers’ exploration, research, development and needs, the countries’ economy, and our technology. Between 1996 and 2007, the natural environment. U.S. oil and natural gas industry invested more than $1.2 trillion in a range of long- To learn more about the oil and natural term energy initiatives. gas industry, please visit API’s website From 2003 to 2007, average earnings for at www.api.org.
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