As many economists have put it, “oil is the lifeblood of the modern economy.” Gas is used in nearly every economic activity, from manufacturing to transportation to use in the home for generating heat.
Although activists have pressed for the re-orientation of the economy away from a dependence on fossil fuels, the oil and gas sector remain vital the global and national U.S. economies nonetheless.
Entire nations have built fortunes solely on the production and export of oil and gas, a claim that cannot be made of any other commodity. Consider the oil kingdom of the Middle East like Saudi Arabia, Qatar, Bahrain, Kuwait, and the UAE. A hundred years ago, these countries were desolate deserts populated by small bands of hunter-gatherers who subsisted on meager incomes. Now, these are some of the wealthiest countries in the world by per capita GPD.
So, what percentage of the global economy is represented by oil and gas? As the answer turns out, a lot.
As of 2019, the three largest oil-producing nations – Saudi Arabia, Russia, and the United States – produced in excess of 30 million barrels of oil each day.
According to the best estimates, the oil and gas industry accounts for nearly 4% of the global economy – far exceeding other industries. Indeed, the share of oil in the global economy is so large that wars have been fought and continue to be fought over the sole issue of access to oil.
Consider the brutal civil war that has plagued Sudan, an oil-rich country in North Africa, for the majority of the 21st century. South Sudan and North Sudan, fueled by ethnic tensions, fought bitterly over access to the oil-rich regions in the south.
Oil has likewise played a crucial role in similar wars of the 21st century. Although other geopolitical factors are always at play, the wars in Libya, Iraq, Yemen, and others that continue today are largely influenced by the massive economic role that oil and gas continue to play.
The Economic Future of Oil and Gas
Understandably, oil and gas industry leaders are concerned about the growing environmental movements that seek the legal banning of fossil fuel production due to the supposed role that it plays in global warming.
Although we may see a dip for the current position of oil representing 3.8% of the global economy, oil and gas will likely occupy a pivotal economic position for years to come.