GDP. You guessed it, it’s an acronym and one of an economist’s very favorite. GDP stands for Gross Domestic Product, which is a percentage made up of the following four ingredients:
- All the money you and I spend on clothes, food, cars, smartphones, bar tabs, makeup, essentially, all the ‘stuff’ we purchase as a nation.
- Investments, like buying a home, your 401k, businesses, and more.
- Net exports: (the amount of stuff other countries buy from us, which includes: oil and gas, clothing, cars, agriculture, software, electronics, and… well, you get the idea) – minus the all stuff we buy from them.
- Government, which includes government salaries, expenditures and purchases from U.S. businesses.
So now, you’re probably asking what does this have to do with oil and natural gas and why should I care? Well, here’s the thing, since 1970, America’s GDP has grown by 246% (faster than the actual population). Today, there’s nearly 10 times more GDP per person ($55,800) than just two generations ago ($5,250). And America’s oil and natural gas industry has been and continues to be, a big part of that uptick.
Today, oil and natural gas supports approximately $1.2 trillion in U.S. GDP. Thanks to new technologies like horizontal drilling, the industry has also created more than 9.3 million permanent jobs in the U.S. Any way you slice it, that’s nearly 7 percent of the entire U.S. economy.
Like many parts of the economy, the oil and natural gas sector goes up, and down… and back up again with the market. Check out the industry’s share of GDP since the late 1970s:
As you can see, the oil and natural gas industry’s portion of America’s GDP is nothing to sneeze at. Think about it. If the whole industry went away, POOF, just like that, we’d say goodbye to $1.2 TRILLION (3.5 percent of the GDP) and countless jobs. An economic catastrophe for sure.
Here in Oklahoma, we’d really feel the sting. The industry is responsible for generating more than $65 billion in goods and services and an average of 30% of the state’s gross product each year.
And remember, energy production is critical to the U.S. economy. Without it, well, we wouldn’t have an economy. So before you jump on the bandwagon for one side of an issue, make sure you fully understand the economic consequences. Because – from healthcare to energy – it all impacts the economy and our way of life.