Introduction

The modern economy is built on energy. From the electricity that keeps lights on to the gasoline in cars, a plentiful and consistent supply of energy is what enables our modern economy to operate day in and day out. This is especially true in Utah, as its population and economy continues to grow year after year and with it, its energy demands. With the goal to substantially increase Utah’s energy production over the next ten years, this article examines the industries that create Utah’s energy, where they are and why they are so significant to employment, wages, and overall economic growth.

What is the Energy Sector?

The energy sector is composed of industries that are involved in the extraction, production, and distribution of energy and the raw materials needed to generate it. This includes a variety of industries such as drilling for oil and gas, coal mining, and power generation and distribution. Given the broad array of industries involved with energy production and distribution, researchers and analysts have employed various definitions of the energy sector. These definitions are typically based on the North American Industry Classification System (NAICS), an industrial classification system used by federal statistical agencies to categorize businesses by industry. For the purpose of this article, the energy sector is defined as including 39 NAICS industries, divided into three main categories: mining, utilities, and other energy industries.

• Mining (Table 1) includes eight industries, comprising roughly 6,000 jobs in Utah, involved in the extraction of natural resources used for energy production such as coal, certain metals, and natural gas.

Source: Quarterly Census of Employment and Wages

Note: Utah 2024 Employment represents average annual employment from October 2023-September 2024, dashes indicate suppression.

• The Utilities category (Table 2) includes industries engaged primarily in electric power generation and distribution, accounting for about 4,000 jobs in Utah. The major industries in this category include Electric Power Distribution and Fossil Fuel Electric Power Generation.

Source: Quarterly Census of Employment and Wages

Note: Utah 2024  Employment represents average annual employment from October 2023-September 2024, dashes indicate suppression.

• The other energy industries category includes a variety of industries in construction, manufacturing, administration/consulting, and distribution of energy such as wind turbine manufacturing, powerline structures construction, regulation of utilities, and petroleum refining (Table 3). In total, this category accounts for 8,870 jobs in the state.

Source: Quarterly Census of Employment and Wages

Note: Utah 2024 Employment represents average annual employment from October 2023-September 2024, dashes indicate suppression.

Trends in Energy Sector Employment

Energy sector employment has increased substantially in the last 25 years, rising from 10,803 in 2000 to 18,967 by September of 2024 (Figure 1). This translates to an average annual growth rate of 2.3%, above the statewide growth rate of 2.2% during the same period. Employment in mining has been the main driver of growth over this period, while employment in utilities and other energy industries has remained mostly steady. Mining industries have experienced fluctuations over this period as they respond to the cyclical growth and decline of energy prices. Conversely, utilities and other energy industries employment levels have remained stable over this period as they are buffered from fluctuations in energy prices. 

Figure 1: Utah Energy Sector Employment 2000-2024

The Energy Sector Is Geographically Concentrated

Employment in the energy sector is not distributed evenly across the state. Rural counties, particularly in the Uintah Basin (Uintah and Duchesne counties) and Castle Country (Emery and Carbon counties), feature high levels of employment concentration in the energy sector, reflecting the presence of rich geological deposits of oil /gas and coal in those regions. A method used to measure industry concentration is by calculating location quotients (LQ), which express the local share of employment in an industry to the nation’s share of employment in that industry as a ratio.When the local employment share is equal to the national employment share, the location quotient is one. A location quotient greater than one indicates a higher level of local concentration in a given industry compared to the national average, and a value less than one indicates a lower level of concentration.

Figure 2 shows the location quotients of the energy sector for each county in Utah during 2024. Some rural counties such as Emery, Rich, and Uintah feature location quotients above 5. This can be interpreted to mean that a person working in Emery County, which has a location quotient of 13.8, is 13.8 times more likely to be employed in the energy sector compared to the national average. Conversely some larger, more economically diverse counties such as Salt Lake County and Utah County feature location quotients below one, indicating a below average concentration of energy sector employment. This wide variation of concentration can in part be explained by the availability of natural resources in some regions. 

Source: Quarterly Census of Employment and Wages

Figure 2: County Energy Sector Location Quotients 2024

When looking at the categories of industries in each county's energy sector, the differences are more apparent. For example in Uintah County, the majority of jobs in the energy sector are in mining (Figure 3), while in Rich County the energy sector is composed almost entirely of utility industries.  

Source: Quarterly Census of Employment and Wages

Figure 3: County Energy Sector Employment share by category

Energy Sector Jobs Yield High Wages

Source: Quarterly Census of Employment and Wages

Figure 4: Energy Sector Average Annual Wage 2024

Jobs in the energy sector consistently have high wages. The average annual earnings of someone employed in Utah’s energy sector in 2024 was $103,288, approximately 64% higher than the state average. This difference becomes even more pronounced when looking at specific areas of the energy sector such as utilities, where average wages sit closer above $120,000 (see Figure 4).  

At the regional level, the energy sector makes up a disproportionately high share of payroll wages compared to its share of employment. For example, in the Castle Country region, 10% of workers are employed in the energy sector, but they make 22% of all wages in the region (Figure 5). These high wage shares highlight the importance of energy sector industries in these regions as a driver of economic activity. 

Source: Quarterly Census of Employment and Wages

Figure 5: Utah Energy Sector Regional Employment and Wage Share

The Energy Sector Fuels Economic Activity

The modern economy is highly interconnected, meaning changes in one industry tend to have ripple effects through the entire economy. Energy is a core input to nearly all economic activities and, as a result, changes in the energy sector can have disproportionately large ripple effects. For example, when a new power plant is constructed, it generates new economic activity in the industries involved in its development - this is an example of an “upstream” effect. Once operational, the plant supplies energy to other industries and pays wages to employees, who spend that income in other areas of the economy. These are examples of “downstream” effects. The more interconnected the goods or services provided, the greater the upstream and downstream effects and larger overall impacts. 

To describe these dynamics, economists use an approach called Input-Output (I-O) modeling that characterizes the linkages upstream and downstream between different industries. I-O modeling allows economists to quantify these linkages with a “multiplier effect”, which shows how a change in one input (jobs, wages, spending, etc) ripples through an economy. The higher an industry's multiplier effect, the greater the economic impact.

Figure 6 shows the employment multiplier effect of energy industries in Utah, using I-O models from Lightcast, a global labor market analytics firm. Jobs in Utah’s energy sector have powerful ripple effects, as shown by their high employment multipliers. Of the 50 industries with the largest employment multipliers in Utah, 14 are in the energy sector. 

Source: Quarterly Census of Employment and Wages & Lightcast I-O model

Figure 6: Energy Sector Industries Employment Multiplier

Take for instance petroleum refining industries. Petroleum refining has one of the highest employment multipliers in the state economy, driven by its high wages, extensive supply chain linkages, and the importance of its output – fuel. As a key input across nearly every sector, fuel enables economic growth far beyond the refining industry itself. Jobs in industries that supply goods and services to refineries, such as equipment manufacturers or crude oil suppliers, are considered indirect jobs. In addition, the wages earned by refinery workers inject spending into local economies, generating jobs in areas such as retail and personal services that would be considered induced jobs. For example, a local barber who depends on refinery workers among their clients benefits from this ripple effect. These strong forward and backward linkages result in petroleum refining industries' high multiplier of 14.8, meaning each job in the industry supports nearly 15 additional jobs across the state economy. 

In terms of wages, the impact is equally apparent as every dollar in wages multiplies throughout an economy. Looking again at petroleum refining with an high average annual wage of $166,297 (Figure 7), these wages are spent on goods and services in other areas of the economy, which induces wage growth in sectors such as retail and hospitality. Similarly, the wages are dependent on the input of upstream industries which fuels indirect wage growth. 

Source:  Quarterly Census of Employment and Wages Statistics & Lightcast I-O model

Figure 7:Energy Sector Industries 2024 Wage Impact

Conclusion

Utah’s energy sector is a growing and important component of the state's economy. Demand for jobs in energy industries continues to grow with the state’s increasing energy needs. These industries are foundational to economic activity throughout the state, not only in the goods and services they provide, but also in the economic activity they generate through the relatively high wages paid to employees, especially in some rural counties where they make up large portions of total wages and employment. Energy demand will continue to grow as the economy expands with Utah positioned to meet these needs.