New York, USA, 7 March 2012 – The energy sector has a major role to
play in global economic growth and recovery, with its indirect
contributions outweighing the already considerable direct effects,
according to a new World Economic Forum report launched today at the
CERAWeek energy conference in Houston, Texas.
The report, Energy for Economic Growth – Energy Vision Update 2012,
provides a framework for understanding the larger economic role of the
energy industry – a role US President Barack Obama emphasized in his
most recent State of the Union Address – at a time when employment and
investment issues are so critical in a troubled global economy. The
oil and gas industry, for example, contributed 37,000 direct jobs in
2011. This drove the creation of an additional 111,000 indirect jobs
during the same period, given an employment multiplier effect of
three. These 150,000 jobs represent 9% of all jobs created in the
United States in 2011. While multiplier effects for solar and wind
energy were lower during operation, their contribution during the
construction phase also reached as high as 3.3 indirect jobs per
energy job.
“The energy industry is unique in its economic importance and has the
potential to be a tremendous catalyst for job creation and sustainable
growth without harming the sector’s overall performance,” said IHS
CERA Chairman Daniel Yergin.
The energy industry is by nature capital intensive and requires high
levels of investment. It thus has the ability to generate significant
contributions to GDP growth, the report says. In the United States,
the oil and gas extraction sector grew at a rate of 4.5% in 2011
compared to an overall GDP growth rate of 1.7%.
The sector’s highly skilled workforce is also well-paid compared to
other sectors, the report notes. Compensation per worker in
energy-related industries is about twice the average in Germany,
Norway, the United Kingdom and the United States and four times the
average in Mexico and South Korea. As a result of higher wages, energy
industry employees contribute more absolute spending per capita to the
economy than the average worker and contribute a larger share of GDP
per worker than most.
“We always suspected that energy had a vital role to play in the
economic recovery,” said Roberto Bocca, Senior Director, Head of
Energy Industries, World Economic Forum, “but we were still surprised
when the data uncovered the magnitude of the sector’s multiplier
effects.”
Energy for Economic Growth – Energy Vision Update 2012 examines the
role of energy prices in the economy. Lower prices reduce input costs
for nearly all goods and services, thus making them more affordable.
Over the short term, economic models show that, for example, lower
natural gas prices will help the US economy in several measurable
ways: a 1.1% increase in GDP in 2013; 1 million more jobs in 2014; and
3% higher industrial production in 2017 than would be anticipated
without shale gas development.
Many countries such as China, India and South Korea are increasingly
focusing on renewable energy sources, including wind and solar, as
potential growth sectors for their economies. However, the higher
costs of these technologies create trade-offs that must be considered,
the report says.
“Energy prices will always be volatile and thus represent a challenge
for long-term economic planning,” said Kenneth Rogoff, Thomas D. Cabot
Professor of Public Policy and Professor of Economics, Harvard
University, USA. “The interesting question is how to make this
volatility less economically damaging.”