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Energy production in California will foster manufacturing sector growth

Posted by Gino DiCaro, VP, Communications on Sept. 9, 2014

**** THIS IS A GUEST POST WRITTEN by WSPA PRESIDENT CATHERINE REHEIS-BOYD **** 


California. lags significantly behind the rest of the country in growing the vital manufacturing sector of our economy but we have a tremendous opportunity to become a major player in the energy boom that is driving major new manufacturing expansion and job growth. Most of the impetus for this resurgence nationally comes from expanded production from oil shale and shale gas reserves. California can join this energy and manufacturing renaissance by tapping the enormous potential petroleum resource contained in the San Joaquin Valley’s Monterey Formation.
 

In an open letter to President Obama, Brookings Institution Senior Fellow Charles Ebinger highlights the connection between renewed domestic energy production and manufacturing, saying the United States is “in the midst of an energy transformation in which our vast abundance of cheap natural gas and rising production of crude oil pose the opportunity for a manufacturing renaissance and a revitalization of the North American industrial base.”

Harold L. Sirkin of the Boston Consulting Group shares Ebinger’s optimism, noting that, “Several major forces are aligning right now that are dramatically reversing the fortunes of a U.S. manufacturing sector that many gave up for dead just a few years ago. The energy advantage and improved competitiveness are unique to the U.S. and are accelerating an American manufacturing renaissance.”

Other studies by IHS and PwC US have shown increased domestic energy production throughout the United States is helping manufacturers reduce energy costs and create hundreds of thousands of jobs. With a wealth of shale oil reserves, California can emerge as a national leader in rebuilding the manufacturing sector. As the nation’s third largest oil producer, California petroleum energy companies produce close to 600,000 barrels of crude oil per day, approximately 10 percent of the nation’s oil production.

The petroleum industry already is a leading economic driver and major manufacturing employer in California with:

  • 468,000 jobs direct, indirect & induced jobs – The petroleum industry is responsible for 2.3 percent of total California employment.
  • $40 billion in labor income – Jobs created or supported by the petroleum industry generate 3.1 percent of California’s total labor income.
  • The petroleum industry’s direct economic value in California equaled 3.8 percent of the state’s entire GDP.
  • $113 billion total economic value – The petroleum industry’s 5.4 percent total GDP contribution to California alone is larger than 17 U.S. state economies.
  • $220 billion in direct economic output – The petroleum industry’s direct economic output was nearly seven percent of California’s total output. This high level of output is noteworthy given the size of our employment.
  • $264 billion in total economic output – The petroleum industry’s combined direct, indirect, and induced economic output equaled 7.7 percent of California’s total output.

To put this in perspective, California’s petroleum industry’s economic contribution to the state outpaces 17 entire state economies nationwide. At a time when job growth in California has been tepid, even stalled at times, the petroleum industry is boosting economic development statewide:
 

  • The industry supports 85,620 total jobs in the Central Valley and contributes $30.7 billion to the region’s economy. Nearly three percent of all Central Valley residents are employed in or around the petroleum industry.
  • Southern California is home to 212,220 petroleum industry direct and indirect jobs. The petroleum industry is responsible for $105 billion in regional economic output.
  • California’s Central Coast earns $1.1 billion from the petroleum industry in local tax revenues.
  • The petroleum industry creates 77,050 direct and indirect jobs in the Bay Area and accounts for more than 10 percent of the region’s economic output.
  • Los Angeles County alone earns $5.2 billion annually in tax revenues generated by the petroleum industry. Nearly 6.5 percent of Los Angeles County’s entire economic output can be traced to the petroleum industry.

During the 2014 legislative session, WSPA supported Assemblymember Adam Gray’s AB 1910, a bill that would establish the San Joaquin Valley Regional Economic Planning and Preparedness Council (SJVREPPC), a badly needed special committee within the California Workforce Investment Board (CWIB) that would identify the programs, policies, partnerships and workforce needs of the emerging energy economy in the region. The legislation received bipartisan support and now awaits the Governor’s signature. Creating job preparedness and workforce investment opportunities is just the type of smart, proactive public policy that will move California manufacturing forward.

Unfortunately, energy policy in California often imposes higher costs on producers that in turn discourage job growth and manufacturing.

Rather than creating policies that stunt expansion and growth, our elected leaders must support efforts to create and attract new manufacturing jobs. The oil and gas industry stands ready to help California play a rightful leadership role in the American energy renaissance.

 

Founded in 1907, the Western States Petroleum Association (WSPA) is the oldest petroleum trade association in the United States. WSPA is a non-profit trade association that represents companies that account for the bulk of petroleum exploration, production, refining, transportation and marketing in the five western states of Arizona, California, Nevada, Oregon, and Washington. For the latest on energy policy in the West, follow @WSPAPrez on Twitter.





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