KGS Open File Report 98-56--1998 Oil and Gas Production--Continued
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The US Department of Commerce's Bureau of Economic Analysis (BEA) prepares regional input-output multipliers that allow the estimation of the total economic impact of the addition or removal of industries or projects to a given region. This study uses these multipliers to investigate the economic impact of the estimated 1998 decrease in oil and gas production on Kansas. These estimates are extrapolated to determine the economic impact of the decline in value of oil and gas production to both the overall economy and the oil and gas industry specifically.
The BEA multipliers account for the interdependence of economic activity throughout a given region, where a region comprises one or more counties. Multipliers are provided for output, earnings and employment, considering final demand and direct effect. These multipliers, plus assumptions of projects or programs introduced into a region, can be used to calculate variables such as the increase in the output value. Multipliers are also instrumental in calculating earnings income such as wages, salaries or proprietor's income less any contributions to private pension funds, and employment levels.
Final demand multipliers for Kansas used in this report are reported in "Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (RIMS II): US Department of Commerce's Bureau of Economic Analysis, 1992", and the " The Economic Impact of Stripper Wells in the United States: Interstate Oil and Gas Compact Commission, 1998".
The decreased in revenue from 1998 oil production in Kansas is estimated at $400 million (tables 1 and 2a). Using final demand multipliers, the lost output to the Kansas economy is estimated at $599 million with estimated lost earnings of $77 million (Table 2a). Statewide lost employment is estimated at 5,680 (Table 2a). Direct effect multipliers can be used to estimate the impact of decreased in revenue from 1998 oil production on the Kansas oil and gas industry (Table 2b). The industry is estimated to face a decrease of $39 million in earnings and a potential decrease of 3,641 employees. The estimated 1997 employment in the oil and gas industry was approximately 6,900.
Table 2a - Estimated economic effects of oil prices and estimated decreased oil production on the Kansas economy.
| Estimated 1998 Decrease in Revenue at Wellhead (Million $) |
Final Demand Multiplier Output |
Final Demand Multiplier Earnings |
Final Demand Multiplier Empoyment |
Lost Output (Million $) | Lost Earnings (Million $) |
Lost Employment |
|---|---|---|---|---|---|---|
| $400 | 1.4982 | 0.1925 | 14.2 | $599.28 | $77 | 5,680 |
Figure 2b - Estimated economic effects of oil prices and estimated decreased oil production on the Kansas oil and gas industry.
| Direct Effect Multiplier Earnings |
Direct Effect Multiplier Employment |
Lost Earnings (Million $) |
Lost Employment |
|---|---|---|---|
| 0.0984 | 9.1014 | $39.36 | 3,641 |
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