US

The Oil And Gas Industry Might Be What’s Keeping Biden’s Economy Humming On Paper Despite ‘Regulatory Assault’

Official White House Photo by Adam Schultz

Oil and gas production is stubbornly hanging on as a key source of economic growth amid a “regulatory assault” from the Biden administration that seeks to wean the U.S. off of fossil fuels, experts told the Daily Caller News Foundation.

Real U.S. gross domestic product (GDP) grew 2.5% in 2023, with the states experiencing the most growth owing largely to their mining sectors, which include oil and gas extraction, according to data from the Bureau of Economic Analysis (BEA). Growth in the domestic harvesting of oil and gas has helped increase GDP, bolstering perceptions of the economy on paper, despite President Joe Biden’s push to hamper fossil fuel production in order to facilitate a transition to alternative sources of energy like solar and wind, experts told the DCNF.

“The current administration has attempted to revitalize manufacturing while disincentivizing fossil fuels in favor of green and other alternative energy sources,” Peter Earle, economist at the American Institute for Economic Research, told the DCNF. “It has accomplished essentially the opposite. Mining and drilling states, including North Dakota, Texas, Wyoming, and Alaska, contributed most to U.S. economic growth in 2023, while the rust belt states are remaining mostly rusty: Ohio, Indiana, and Michigan grew by a fraction of what the oil and gas producing states did in 2023.”

The total dollar output for the mining sector grew in 43 states and was the leading contributor to growth in seven of those states, according to the BEA. Of those seven states, North Dakota, Texas, Wyoming, Alaska and Oklahoma were the top five states that saw the biggest GDP increases in the year.

Jobs in the mining and logging sector, which includes oil and gas extraction, dropped dramatically during the COVID-19 pandemic, from around 689,000 in January 2020 to 559,000 a year later, according to the Federal Reserve Bank of St. Louis. Jobs in the sector rebounded to 645,000 in September 2023 but have remained largely stagnant since, measuring the same in March 2024.

“As a result of regulation and higher input costs from inflation, drillers have focused on reducing well heads and running all operating rigs at maximum efficiency,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “While that has increased production as crude and natural gas prices have risen, these leaner operations have meant fewer employees per barrel of oil or per BTU of gas. Thus, while the industry is increasing its contribution to GDP, it’s not contributing a commensurate increase in jobs.”

In terms of private goods-producing industries, mining was the top contributor to the rising GDP, while retail trade was the largest for private services-producing industries, according to the BEA. Mining accounted for 12.4% of total GDP growth in 2023, making up 0.31% of the total 2.5% GDP increase.

“Looking at mining’s contribution to national income, the other side of the equation, we can see it’s less than 1% of the total,” Antoni told the DCNF. “That being said, by providing the most affordable sources of energy, and doing so en masse, mining is making significant contributions to GDP. Increased production today has put downward pressure on energy prices, which trickle down to everything in the economy. The problem is that inflation has more than countered this effect, and the administration’s anti-fossil fuel policies have made it worse.”

The mining sector grew 19.6% in 2023, the largest of any industry, compared to a decline of 9.0% in 2022 and 11.8% in 2021, according to the BEA.

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“Domestic fossil fuel production is keeping consumer prices down and contributing to U.S. employment,” Earle told the DCNF. “Unfortunately, the official jawboning against fossil fuels — while it substantially contributes to the U.S. economy — allows proponents of unproven, unprofitable energy technologies to maintain the façade that solar and wind energy are seamless, direct substitutes for liquid dinosaurs. It’s not, and perhaps never will be, the case.”

The last two quarters of 2023 experienced above-trend economic growth, with GDP rising 3.4% in the fourth quarter and 4.9% in the third quarter, according to the BEA. Inflation has continued to run hot since its peak of 9% under Biden in June 2022, staying above 3%, most recently measuring 3.5% in March.

The Biden administration has been particularly hostile to the growth of the oil and gas industry, pursuing a number of actions to curb production, including reducing the number of new oil and gas leases handed out to companies. The White House has taken increasingly hostile steps toward the industry in the past few months, pausing the review process for liquefied natural gas export terminals and placing even more restrictions on oil and gas activity in Alaska, in line with a previous pledge to cut back federal support for fossil fuels.

“No more subsidies for the fossil fuel industry,” Biden said in a presidential primary debate ahead of the 2020 election. “No more drilling on federal land. No more drilling, including offshore. No ability for the oil industry to continue to drill period.”

Despite the Biden administration’s harsh regulatory environment, the U.S. has maintained its position as world leader in the production of crude oil, which it took from Russia in 2018 under the Trump administration, according to the U.S. Energy Information Administration (EIA). Domestic production of crude oil began to rise rapidly in the U.S. in 2008 due to the widespread adoption of hydraulic fracturing and horizontal drilling.

Contrary to the harsh rhetoric, Biden did greenlight the $8 billion oil drilling Willow project in Alaska in March 2023, which faced an intense environmentalist campaign calling for it to be halted. The climate movement has suffered a number of defeats besides the Willow project under Biden, including the failure of several offshore wind projects and slow growth in the electric vehicle market.

“The bigger issue here is that gross domestic product (GDP) and crude oil production are two important statistics, but, in isolation, they don’t paint a comprehensive picture of the economy,” Oliver McPherson-Smith, director for energy and environment at the America First Policy Institute, told the DCNF. “Americans don’t fill their cars up with crude oil — they use refined petroleum products. Our petroleum refining capacity peaked in early 2020, and, due to the Biden administration’s regulatory assault on American industry and workers, it still has not recovered from the pandemic.”

The U.S.’s operable capacity for crude oil distillation peaked in March 2020 at around 18,976,000 barrels per day, steadily declining amid the COVID-19 pandemic to 17,877,000 per day in December 2021, according to the EIA. Refining capacity has increased since then to 18,429,000 barrels per day, still far lower than the pre-pandemic peak.

“A strong domestic refining capacity would otherwise help to insulate American consumers from the volatility of global commodity markets,” McPherson-Smith told the DCNF. “Yet, the Biden administration has paired its industry-killing domestic regulations with a reckless foreign policy that stokes instability, emboldens our adversaries, and exacerbates geopolitical risk.”

The White House did not respond to a request to comment from the DCNF.