Oil, natural gas power Nevada economy

When you think of Nevada’s key economic sectors, you probably think of gaming.

Maybe mining, too. Or even housing, which affects the economy big time, whether it is doing well or poorly.

So how about the oil and natural gas industry? Sure, states such as Texas, Oklahoma and Wyoming get a lot of attention for their fossil-fuel production, but it might surprise you to hear that Nevada claims its own chunk of the sector as well, according to an industry expert who spoke at a Tuesday forum in the M Resort.

Natural gas and oil employ 43,500 Nevadans, Rayola Dougher, a senior economic adviser with the American Petroleum Institute trade group in Washington, D.C., told about 100 people at a luncheon sponsored by the Nevada Energy Forum. The forum is a citizens group that promotes energy independence and using America’s energy resources.

The oil and gas industry’s share of employment is 3.3 percent of the state’s 1.3 million labor force. And at nearly $6 billion in economic output, oil and gas are behind 5.8 percent of the state’s gross state product, Dougher said.

The energy sector also has important implications for the rest of the state’s economy, Doughner said.

Fuel prices affect whether tourists can afford to fly or drive here. The biggest driver of fuel costs is crude oil, which was behind 68 percent of the price of a gallon of gasoline in 2010. Other drivers included refining and retailing, at 18 percent, and excise taxes, at 14 percent.

Crude prices jumped to more than $100 a barrel in the spring, but were at $79 a barrel Tuesday. Gasoline prices in Las Vegas jumped to nearly $4 a gallon for regular unleaded fuel in April, but had fallen to $3.46 a gallon on Tuesday.

Dougher credited the earlier price jump to stronger global economic growth, which increased demand and prices for crude. She traced the recent price crash back to economic pessimism surrounding drops in stock markets and a downgrading of the U.S. debt.

"Oil prices can move in big swings based on news alone," she said.

Other factors that affect oil prices include geopolitical unrest, weather events, speculation and investment, producers’ output decisions and the value of the U.S. dollar.

Going forward, Nevada’s economy should show signs of life, Dougher said. Gasoline sales in the state were down 3.4 percent year over year in April, but unemployment has fallen in the last year, while taxable sales, visitor volumes and the number of passengers flying into McCarran International Airport have risen.

"There are some positive signs, and I think it’s hopeful," she said. "It’s not as dire as it may feel, especially with all the economic news we’ve been hearing lately. Things are looking up. Our recovery in the United States certainly is not what we all hoped for, but I think we’re still in a little bit better of a place than we were a couple of years ago."

Dougher said after the event that supplies for natural gas, which fuels more than 70 percent of Nevada’s electric generation, are "fantastic," with a 100-year supply and newly discovered deposits "that brought prices way down."

The United States has solid oil supplies as well, but exploring those stores could be a tough political sell, she said.

Rep. Joe Heck, R-Nev., also spoke at the event.

Heck said weaning the United States off of foreign energy sources is a matter of both national and economic defense. He said the nation must focus on three critical areas: fossil fuels, renewable energy and nuclear power.

The nation needs to explore new sources of fossil fuels and develop technologies such as carbon sequestration to reduce the fuels’ effects on the environment, he said.

Expanding renewable energy will require dealing with a shortage of transmission grids and addressing environmental and military concerns. And with Yucca Mountain in limbo, the nation needs to sort out waste-storage issues to boost nuclear energy.

"We have to support prudent development of nuclear energy, which is a sustainable energy source that reduces carbon emissions," Heck said.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.