Enverus Blog

Insights across the energy value chain

US commodity industry A is dominated by huge concerns. 10% of the overall number produces 72% of all the output, and that number is increasing. In all, it accounts for 0.065% of the US economy. Every American is a consumer of its products.

US commodity industry B is dominated by small concerns. The small concerns produce in excess of 50% of the output, and is increasing its take. It accounts for 0.09% of the US economy (50% more than Industry A). 70% of Americans are direct consumers of its product.

Pop Quiz

Question 1. One of these industries is honored for its small producer grassroots and its importance to the US economy. Choose: Industry A or Industry B.

Question 2. One of these industries continuously characterized by politicians and the press for being big, voracious, and greedy and heavily subsidized, that subsidy being very occasional breaks on an overall tax burden that approaches 50%. Which industry is it? Choose: Industry A or Industry B.

Question 3. One of these industries is supported by musicians and entertainers with an annual picnic that raises some $1,000,000 per year to support the small producer. Choose: Industry A or Industry B.

Question 4. Which one of these industries directly supports the other to the equivalent tune of some 25,000 of these Picnics per year? Choose: Industry A or Industry B.

Question 5. Which one of these industries pays little or no tax on its output, and even gets tax credits? This same industry also receives money from the Federal Government NOT to produce output? Choose: Industry A or Industry B.

Question 6. Which one of these industries provides federally subsidized fuel to US motorists in order to support American production? Choose: Industry A or Industry B.

Question 7. One of these industries is protected by a 14% tariff. The other, a federal tax on imported commodity equal to 0.02%. Which industry has the 14% tariff protection? Choose: Industry A or Industry B.

Question 8. Which industry has an image more diametrically opposite reality? Choose: Industry A or Industry B.

ANSWERS – 1. A, 2. B, 3. A, 4. B, 5. A, 6. A, 7. A, 8. What the hell do you think?

Selling the Farm

You’re Doing it Wrong: What Oil & Gas can Learn from Big Agriculture MarketingWe are, of course, comparing farm agriculture (Industry A) and Oil & Gas production (Industry B). Farming is firmly fixed in the public’s eyes as little family farms, when, in fact, its output is dominated by big concerns with massive lobbying support that very effectively use the “poor ol’ family farmer” to extract an amount of corporate welfare so large an entire Federal Department exists to handle the payments. Mind you, I am not being critical. I look in awe and with envy at how an industry can wrap a government around its little finger and make it dance the Macarena on demand.

Alternatively, US Oil & Gas production is truly dominated by the little guys, and it is getting more so every year. We are among the most heavily taxed industries in the country, and if we make a profit margin approaching the average industrial margin, we are attacked for making “Windfall Profits” – a term invented and only applied to our industry! When politicians, press, and public think of us, the image of fat men in 1900’s bankers stripes and spats and top hats mouthing cigars with the name “ExxonMobil” printed on the side like a muckraking cartoon comes to mind. (But, even they don’t fit that stereotype.)

Brain Drain

You’re Doing it Wrong: What Oil & Gas can Learn from Big Agriculture MarketingSo, no corporate welfare here, and a US Department of Energy (DOE) which is gutting US University education in Petroleum Geology, Geophysics, and Petroleum Engineering by zeroing out all research dollars for Oil & Gas from now on. While Oil & Gas provides the majority of our energy mix, the government is expanding research dollars on coal through the roof.

Yes, that’s right. The DOE will no longer have much knowledge or input into Oil & Gas as a fuel source. We have been orphaned on the side of the road by our parents who like their new babies better. More terrifying, we will be without knowledgeable Federal advocates in the near future. These people are the last blocks to the extensive havoc politicians can reap on our industry as they eye our output for more slop in the tax trough. And, they only get away with it because Big Oil does not want to be beholden to the Feds.

Whereas Big Agriculture has maximized its positive public personae and its time at the subsidy table by hiding behind the image of the family farm, we do the exact opposite. Time and time again, Big Oil clumsily trots out its consistently defensive and arrogant message that couldn’t do a better job of making people think our industry is really full of “arrogant greedy pigs” if it had been designed by Earth First!

If you were a conspiracy theorist, you might even think they wanted the US oilpatch to be the most highly regulated and taxed commodity in the country, while ensuring that we have no more pipeline of University-trained expertise to carry on our industry after another generation or two, while strangling domestic competition from the small producer as an added bonus!

To add even more insult to industry, we all now get the privilege of subsidizing corn as the US’s preferred fuel, even though it takes more energy to create than it releases. Now that’s what I call marketing! Put a tiger in that tank, you men that wear the Star!!

Just the Facts

Here is the raw data on how small farms economically stack up against smaller independent Oil & Gas operators.

Small Family Farms % of farms: 90% of US production: 28
Very Large Family Farms % of farms: 7% of US production: 58
NonFamily Farms % of Farms: 3% of US production: 14

Private Independents % of Producers: 97% of US Production (Gas); (Oil): 50; 45
Public Independents % of Producers: 3% of US Production (Gas); (Oil): 32; 23
Major Oil Companies % of Producers: .04% of US Production (Gas); (Oil): 18; 32

We as an industry would do very well to come down from our self-imposed ivory towers. We need to take a step back and help the average American see that the real face of the US Oil & Gas industry is comprised of small shops with a few guys, a drill and a dream. If we could successfully communicate that message, who knows, maybe Willy and friends would throw us an “Oil Aid” concert some day!

Now it’s your turn. What do you think our industry can do to better help Americans see the real face of the Oil & Gas industry? Please, leave a comment below.

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