The Western States Petroleum Association has apparently never heard the saying, "When you're in a hole, stop digging."
As I've described at length before, WSPA has repeatedly made a mess of its claims that a new oil boom could bring a historic burst of prosperity. Now, WSPA is doubling down on the idea. On April 21, WSPA released another study of the California oil and gas industry's economic impact, commissioned from the Los Angeles County Economic Development Corporation. Unfortunately, the whole effort suffers from the same sort of inconsistency and sloppy math as WSPA's previous attempts.
First, let's understand the context here and why it all matters. Although WSPA didn't mention it in its announcement, the study is certainly being positioned as a major weapon in WSPA's emerging campaigns against fracking moratorium attempts in the state Legislature and the Los Angeles City Council, as well as a potential ballot initiative for an oil severance tax. Earlier this month, the California Chamber of Commerce placed SB 1132 on its annual "Job Killer" list, which traditionally is highly effective in scaring off legislators from pesky regulatory bills.
Now, to the dodgy math and even dodgier logic:
Last year, when WSPA commissioned its widely ridiculed economic study from the University of Southern California, one of the main points of attack by critics such as myself was that the USC study didn't even bother to calculate current oil and gas employment as a baseline. Instead, its projections were concocted with slight-of-hand modeling that several of the state's top academic experts in economic forecasting said was completely unreliable.
To the right, the top two boxes show the main findings of WSPA's new study with regard to jobs. And below it, for comparison purposes, the third box shows the main findings of a study that WSPA commissioned in 2011, carried out by Purvin & Gertz, one of the nation's most prominent oil industry consultancies.
A few points about the three boxes:
1) WSPA's new study calculates 188,500 jobs from the petroleum industry statewide, almost double the 2011 study's calculation of 94,860 jobs. Because no output growth has been reported in oil and gas production and refining during that period, we have WSPA arguing against itself. Which numbers are to be believed?
2) It should be remembered that only the upstream and midstream sectors (exploration, production and distribution to refineries) would be directly affected by either a production boom or a legislative moratorium, while the downstream sector (refining and retailing) would not be affected by either of these scenarios (See p. 24 of my Next Generation report for an explanation). In other words, even a complete shutdown of California oilfields would not change the amount of oil processed by California refineries because they would simply switch to imported sources, and California drivers are not going to change the amount of gasoline they consume if it can be traced back to oilfields in California, North Dakota or Saudi Arabia. So most of the total industry employment would remain unchanged even in the most extreme scenario. To cite refining and gas station jobs as relevant to current policy debates is completely misleading. It's combining apples, oranges and kumquats.
3) So WSPA's new study comes to a total of 59,520 upstream and midstream jobs, while the 2011 study came to a total of 21,244 upstream and midstream jobs. While the new study doesn't list the multipliers used for each category to calculate indirect employment, it seems that the former would come to a total of 150,000 direct, indirect and induced jobs, while the latter would come to about 55,000 direct, indirect and induced jobs. Just remember, when WSPA and the Chamber of Commerce start talking about "job killing" this and that during election season, the real numbers at stake are somewhere between 150,000 and 55,000 jobs statewide.
4) Notwithstanding all of the above, the reduced number of jobs at stake still remains a significant number. Let's not be naive. As I've discussed here before, anything that could eliminate a significant portion of those jobs (such as SB 1132, the fracking moratorium) would be politically counterproductive and could single-handedly rescue the California Republican Party from much-deserved oblivion. For that very reason, Jerry Brown would almost certainly veto SB 1132. But we can bet the farm that WSPA and the Chamber of Commerce will throw around the much higher numbers that combine apples, oranges and kumquats galore.