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Research & Commentary: Study Highlights the Massive Importance of Oil and Gas Industries to the Michigan Economy

September 3, 2021

Industries Provided 4 Percent Of State Employment, 5 Percent Of Labor Income, 5 Percent Of Economic Impact

new report commissioned by the American Petroleum Institute (API) and undertaken by PricewaterhouseCoopers (PwC) has found the oil and natural gas industries directly or indirectly supported over 250,000 jobs in Michigan in 2019, or 4.3 percent of the total share of state employment. Further, the oil and gas industries produced $15.9 billion in labor income, which was 4.7 percent of the state total share, and had a statewide economic impact of $28.5 billion, for 5.3 percent of the state total share.

“As America’s economy comes back, the natural gas and oil industry will serve as the foundation for long-term growth and prosperity,” API President and CEO Mike Sommers said in an accompanying press release. “Every state across the country – both blue states and red states – rely on American energy to fuel each sector of the economy and support millions of U.S. jobs. This study reinforces that America’s economic outlook is brighter when we are leading the world in energy production, and it serves as a reminder of what’s at stake if policymakers restrict access to affordable, reliable energy and make us more dependent on foreign sources.”

The importance of the oil and gas industries to the Michigan economy is crystal clear, yet that doesn’t stop environmental activists and state policymakers from looking for ways to curtail the activities of the industries in the Wolverine State, or to go even further and eliminate their presence altogether. This would be disastrous for Michiganders.

report released in November 2019 by the Global Energy Institute (GEI) at the U.S. Chamber of Commerce details how a ban on hydraulic fracturing (colloquially known as “fracking”) across the country would have a devastating consequences for the Michigan economy. According to the study, if a fracking ban took place, Michigan would experience the cumulative loss of 516,000 jobs thanks to higher residential and business energy costs and upstream production losses, as well as $159 billion in lost gross domestic product (GDP), and a $13.5 billion loss in state and local tax revenues by 2025. Over that same period, Michigan households would experience a $88 billion loss of income and Michiganders would suffer a per capita cost-of-living increase of $5,170.

While production has declined in recent years, Michigan is still the eighteenth-largest producer of natural gas in the United States, as well as the nineteenth-largest producer of crude oil. However, “the significance of oil and natural gas in Michigan…is primarily in the roles these resources play in manufacturing,” the GEI study notes. “The manufacturing of transportation equipment accounts for almost half of the state’s manufacturing gross domestic product, which totaled over $102 billion in 2018, sixth-largest in the country. In total, Michigan’s manufacturing sector accounts for over 14 percent of state employment.”

The oil and natural gas deposits found in Michigan are still relatively abundant, and are inexpensive, environmentally safe, and can ensure the United States is the world’s largest energy producer well beyond the 21st century. Therefore, Michigan policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the state economy.

The following documents provide more information about fossil fuels.

Impacts of the Natural Gas and Oil Industry on the U.S. Economy in 2019
https://www.api.org/-/media/Files/Policy/American-Energy/PwC/API-PWC-Economic-Impact-Report.pdf
This study, conducted by PricewaterhouseCoopers and commissioned by the American Petroleum Institute, shows that the natural gas and oil industry supported 11.3 million U.S. jobs in 2019, produced $892 billion in labor income, and had a nationwide economic impact of nearly $1.7 trillion The study also shows the natural gas and oil industry has had widespread impacts in each of the 50 states.

What If…Hydraulic Fracturing Were Banned? (2020 Edition)
https://www.globalenergyinstitute.org/sites/default/files/2019-12/hf_ban_report_final.pdf
This study from the Global Energy Institute at the U.S. Chamber of Commerce says a ban on fracking in the United States would be catastrophic for our economy. Their analysis shows that if such a ban were imposed in 2021, by 2025 it would eliminate 19 million jobs and reduce U.S. Gross Domestic Product by $7.1 trillion. Tax revenue at the local, state, and federal levels would decline by nearly a combined $1.9 trillion. Natural gas prices would leap by 324 percent, causing household energy bills to more than quadruple. By 2025, motorists would pay twice as much at the pump for gasoline as oil prices spike to $130 per barrel, while less domestic energy production would also mean less energy security.

America’s Progress at Risk: An Economic Analysis of a Ban on Fracking and Federal Leasing for Natural Gas and Oil Development
https://www.api.org/~/media/Files/Oil-and-Natural-Gas/Hydraulic-Fracturing/2020/fracking-ban-study-americas-progress-at-risk.pdf
The study from the American Petroleum Institute (conducted by economic modeling firm OnLocation)  warns that banning federal leasing and fracking on public and private lands, which some presidential candidates have proposed, would cost up to 7.5 million American jobs in 2022 alone, lead to a cumulative GDP loss of $7.1 trillion by 2030, slash household incomes by $5,400 annually, increase household energy costs by more than $600 per year and reduce farm incomes by 43 percent due to higher energy costs. If a ban is enacted, the U.S. would flip from being a net exporter of oil and petroleum products to importing more than 40 percent of supplies by 2030.

The Value of U.S. Energy Innovation and Policies Supporting the Shale Revolution
https://www.whitehouse.gov/wp-content/uploads/2019/10/The-Value-of-U.S.-Energy-Innovation-and-Policies-Supporting-the-Shale-Revolution.pdf
This report from the White House Council of Economic Advisors estimates that increased oil and natural gas production due to the fracking revolution is saving American families a combined $203 billion annually, or around $2,500 per family. On top of this, the fracking revolution is benefitting the environment, lowering energy-related greenhouse gas emissions by 527 million metric tons between 2005 and 2017.

Debunking Four Persistent Myths about Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/debunking-four-persistent-myths-about-hydraulic-fracturing
This Heartland Institute Policy Brief by Policy Analyst Timothy Benson and former Heartland communications intern Linnea Lueken outlines the basic elements of the fracking process and then refutes the four most widespread fracking myths, providing lawmakers and the public with the research and data they need to make informed decisions about hydraulic fracturing.

The Local Economic and Welfare Consequences of Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/the-local-economic-and-welfare-consequences-of-hydraulic-fracturing
This comprehensive study published by the National Bureau of Economic Research says fracking brings, on average, $1,300 to $1,900 in annual benefits to local households, including a 7 percent increase in average income, a 10 percent increase in employment, and a 6 percent increase in housing prices.

Local Fiscal Effects of a Drilling Downturn: Local Government Impacts of Decreased Oil and Gas Activity in Five U.S. Shale Regions
http://www.rff.org/files/document/file/RFF%20Rpt-SPF.pdf
This study from Resources for the Future finds 82 percent of communities in the five largest shale regions in the United States experienced a net fiscal benefit from hydraulic fracturing despite a large drop in oil and natural gas commodity prices starting in 2014.

The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
https://files.texaspolicy.com/uploads/2018/11/27165514/2018-11-RR-US-Leads-the-World-in-Clean-Air-ACEE-White.pdf
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. Instead, the paper urges for the data to be considered and applied to the narrative.

Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
https://www.heartland.org/publications-resources/publications/climate-change-reconsidered-ii-fossil-fuels---summary-for-policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).

The Social Benefits of Fossil Fuels
https://www.heartland.org/publications-resources/publications/the-social-benefits-of-fossil-fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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