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Marginal Wells: Fuel For Economic Growth

RIMS II Multipliers

Until 2003, this report was based on RIMS II multipliers provided by the Bureau of Economic Analysis (BEA) for industry number 8.0000, Crude Petroleum and Natural Gas. Since then, re- vised multipliers based on the BEA’s 1997 nation- al and 2001 regional accounts have been used.

  • e RIMS II multipliers based on this updated

work were first released in May 2004. e mul- tipliers have been re-categorized to Industry 211000, Oil and Gas Extraction. A comparison of these new factors against the old shows that the overall multiplication effect has on average increased for output and earnings for all of the survey states.

However, the employment, while up on average, is not up for all states. e basic implication of these changes is that the economic activity gener- ated by marginal well production has a larger impact on the U.S. economy under the revised multipliers, assuming no change in price levels.

  • e magnitude of that impact is dependant on

the prices received for the oil and gas.

  • e multipliers are shown in Table 4. e Final

Demand Multipliers shown in the first three columns represent the total economic impact on the region relative to a change in demand of the

output, which, in this case, is expressed as the value of marginal oil production.

  • e same oil and gas values can be used to deter-

mine the total impact on earnings and employ- ment for the region. ese final demand multipli- ers include output, earnings and employment not only within the crude petroleum and natural gas industry, but also from secondary interrelated in- dustries that are impacted in the region. Examples of these secondary sectors could be non-oilfield equipment manufacturers, local retailers and health care professionals that provide goods and services to both the oil sector and other sectors. Please refer to the Appendix for a more complete discussion about RIMS.

  • e direct effect multipliers shown in the fourth

and fifth columns represent the total impact rela- tive to a direct change in household earnings or employment. ey are used whenever changes in household earnings or employment are known. As presented, they are not directly applicable for the purposes of this study. However, they represent the ratio between the industry specific multiplier and the final demand multiplier. is relationship allows the calculation of earnings and employ- ment multipliers for the oil and gas industry alone (sixth and seventh columns), without regard to the earnings and employment levels of any secondary industries.

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