Misperceptions, whether driven purposefully by ideological opponents, or simply from lack of good information, permeate the average American’s view of the oil and gas industry and have contributed mightily to the notion that what’s good for the oil and gas industry must by definition, not be good for America.
Misperceptions about the industry abound. For example, the term “oil and gas executives” for many conjures up images of smoke-filled boardrooms where middle-aged men in 10-gallon cowboy hats guzzle scotch, chain smoke Cuban cigars lit by one hundred dollar bills, and conspire via video conference with their Arab Sheik brethren about how to artificially raise the price of gas to squeeze every last nickel out of the consumer. Another example is the common knee-jerk reflex assumption from the mere sight of a drilling platform, tanker, or pipeline that an Exxon Valdez moment is just waiting to happen.
But as John Adams famously said, “Facts are stubborn things.” And the facts are clear; the oil and gas industry has been, and continues to be, good for the US and its economy.
The industry as a whole represents one of the country’s largest employment sectors. According to the latest available data, the oil and natural gas industry supports 5.9 million jobs — 1.8 million people directly employed by the industry, with more than 4 million indirect jobs.
Many other Americans derive financial benefit from the industry through direct investments in the stocks and bonds of oil and gas companies or through mutual funds in their retirement and 401(k) accounts. The oil and gas industry touches nearly all aspects of our economy, providing the fuel used to transport people and goods, heat our homes and workplaces, and power our factories. Petroleum-based products such as plastics have almost limitless applications — in cars, homes, computers, toys, clothing, and medicines to name a few.
Contrary to popular belief, companies in the oil and gas industry are leaders in researching, developing, and investing in new, clean energy technologies for our future. Finally, despite a few very high-profile instances, the oil and gas industry maintains one of the nation’s strongest safety and environmental records.
The US is at a historic turning point for its energy policies. However, many Americans lack a full understanding of the oil and natural gas industry and likely have misguided or misinformed perceptions.
Discussion seems to have shifted more to an “either-or” notion of fossil fuels versus forms of renewable energy. Little talk has centered on how both can coexist in developing America’s energy policies of the future. The reality is that both broad forms of energy will be needed to power our economy and society in the years to come.
To encourage a constructive public policy debate that leads to a new fact-based comprehensive energy policy, we must actively address some of the misperceptions about the oil and gas industry.
Simply, we must tell our story, or someone else will.
One of the biggest misconceptions out there is that the oil and gas industry profits more than any other industry. Facts tell a different story.
As a percentage of net income to sales, the oil and gas industry actually ranks seventh behind such industries as drug, manufacturing, tobacco and beverage. While some are touting that executives from “Big Oil” are the only ones who stand to gain from industry profits, it simply isn’t true.
According to Energytomorrow.org, only 1.5% of industry-wide shares are owned by corporate management. The rest are owned by tens of millions of Americans, many of whom are in the middle class. In particular, a recent study by economists Robert J. Shapiro and Nam D. Phan found that 43% of oil and natural gas company shares are owned by mutual funds and 27% of shares are owned by more than 2,600 pension funds representing, among others, retired soldiers, teachers, and police and fire fighters.
Another misconception is that the oil and gas industry doesn’t pay its fair share of taxes. Again, facts say this isn’t true. A significant portion of revenue earned by US oil and natural gas companies goes to payment of taxes. US oil and natural gas companies pay considerably more in taxes than does the average manufacturing company. According to the US Energy Information Administration (EIA), the industry’s 2007 income tax expenses (as a share of net income before income taxes) averaged 40.4%, compared to 26.7% for all US manufacturing companies. In addition, Congress has enacted tax laws over the past few years that are expected to cost the industry around US $10 billion in additional taxes.
However, this figure is dwarfed by the Obama Administration’s proposed FY 2010 budget, which includes new taxes and fees on the oil and natural gas industry that could potentially total more than $400 billion over the next 10 years.
