A New Performance Measure to Test the Contribution of the Petroleum and Natural Gas Industry in an Expanding Economy

Abstract

Annual Meeting of the American Institute of Mining, Metallurgical, and Petroleum Engineers, 14–18 February, New York City National income originating compared to physical production for an enterprise or an industry reflects its ability to strengthen the national economy. For a single industrial sector or for an industry this comparison can be useful to reflect changes that may occur in this ability to contribute because or changing supply demand-income-investment equilibria. A favorable relationship can be postulated by specified economic incentive, and the accompanying technologic input required can be shown. The new index proposes the use of the Federal Reserve Board indexes of production divided by the constant dollar income originating in the petroleum industry which reflects increases or decreases in performance. When compared with other mineral industries and with total industry, an approximation of relative strength is evident. By constructing three different hypothetical conditions for future petroleum imports, assuming a constant excess capacity requirement for domestic production, and providing an estimate for future domestic demand for petroleum, the impact on the performance index can be shown. Thus, a strong position for the petroleum and natural gas industry can be stated. If this is done, it becomes evident that because of restrictions on cost-price relationships, a drilling program that would provide enough domestic oil to meet demand may not be practicable. By difference, the amount of improvement in methods of production and processing through technologic advancements can be stated explicitly.