As the global economic outlook continues to be uncertain, the World Economic Forum has shone a spotlight on the energy sector, highlighting, among other issues, the major contributions that the energy sector can make towards job creation, economic recovery and growth.
Its "Energy For Economic Growth" report points out that although the energy sector constitutes only a modest share of GDP in most countries, its impact is greater than the sum of its parts. The sector is characterised by broad supplier networks, which create multiplier effects throughout the economy. Its workforce is small in relation to the size of its output, but is skilled, productive and well-paid. This gives rise to disposable incomes that spur growth across the economy. The takeaway is that stable and accessible energy prices are thus vital for re-igniting, expanding and sustaining world economies.
The US oil and gas industry grew at a rate of 4.5 percent in 2011, compared with the overall GDP rate of 1.7 percent.
For every job directly related to the industry that was created in that year, three or more indirect jobs were created across the economy, a result of the significant capital investments required. From 2010 to 2011, when employment in the US oil and gas industry grew by 4.9 percent, directly adding 37,000 jobs to the US economy, this went on to spur the creation of an additional 111,000 indirect and induced jobs during the same period. The total of these 150,000 jobs represented approximately 9 percent of all jobs created in the US in 2011.
An employment multiplier of three puts the oil and gas industry above the financial, telecommunications, software and non-residential construction sectors in job creation.
The same dynamics are present in the power generation sector--albeit with slight variations. Most job creation in this sector occurs in the construction phase. This ranges from direct jobs related to the construction and the manufacturing of equipment to indirect jobs in the manufacturing of support equipment such as the steel used in the construction of wind turbines. These jobs are temporary. But those created after the power plant is operational, though fewer, are permanent.
There is little doubt that the energy sector can be a driver of economic growth, but the challenge is: How can governments best enact policies to develop the sector.
This is a summary of the chapters "The Role of the Energy Sector in Job Creation" and "Energy Sector Job Creation" from the WEF report,Energy For Economic Growth. The full report is available here.
BY: World Economic Forum, in partnership with IHS CERA
