Petroleum’s Impact on Mississippi’s Economy

Petroleum’s Impact on Mississippi’s Economy

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Behind the electric power industry, petroleum production, refining, storage, and distribution is the second largest segment of Mississippi’s energy sector, and these two sectors make up the vast majority of Mississippi’s energy sector. Because of high average wages in the energy industry and the wealth produced through the value chain, the sector has a disproportionate impact on the state’s economy. While direct employment in energy may only be about 2% of total state employment, the sector accounts for about 9% of state GDP.

Oil production in MS has increased due to unconventional production methods. First, the naturally occurring presence of CO2 along with decades of private pipeline infrastructure investment has enabled the growth of the enhanced oil recovery (EOR) industry, which injects CO2 into previously produced oil fields to significantly increase the productive life of the resource. EOR makes up more than half of all oil production in MS today and will hopefully continue to rise. The reversed trend from decreasing production to increasing production, which started around 2004, is due to EOR development.

Also hopefully contributing to growth in Mississippi oil production will be the development of the Tuscaloosa Marine Shale (TMS) in southwest MS. Drilling permits are up and development costs have decreased, but the drop in oil prices has now added to the economic and technical challenges of the TMS. Growth in production is expected, but the rate in growth ahead, due to the marginal economics of this shale play compared to others, is unknown. Oil prices will dictate investment levels in 2015 and beyond.

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