API-commissioned study finds broad pension ownership in US industry

Nearly half the outstanding stock in publicly traded US oil and gas companies is held by public and private pension and retirement plans, including 401(k) plans and individual retirement accounts, a new study commissioned by the American Petroleum Institute found. By contrast, corporate management of these companies owns less than 3%, including just 0.5% for the integrated firms, API added.

The study by Robert J. Shapiro and Nam D. Pham of Sonecon LLC, a Washington economic advisory firm, also concluded that benefits of this broad ownership increased in recent years as the price of crude oil rose from $58.41/bbl in 2006 and $93.05/bbl in 2008 to $101.66/bbl over this year’s first 9 months.

“The resulting higher prices have produced, in part, the strong returns of US oil and gas companies and benefits for their broadly distributed owners,” it said.

“The good news from this study is that the high returns generated by the industry in the last 5-6 years are being distributed quite broadly to retirees and middle class Americans as the values of their homes and other assets have declined,” said Shapiro, Sonecon’s cofounder and chairman, in an Oct. 26 teleconference.

API released the study, which updates one from 2007, as most publicly traded oil and gas companies, drilling contractors, and service and supply companies begin to release their latest quarterly financial results, according to Kyle Isakower, API’s vice-president of regulatory and economic policy. “There was no intent, when we commissioned the study, to use it for any particular policy action or discussion,” he said. “That being said, we can see a fortuitous nexus of timing in its coming out now with its message.”

Shapiro said the study goes farther than information the US Securities and Exchange Commission requires. “The SEC is interested mainly in corporate officers, financial institutions, and institutional investors, which holds about 70% of most companies’ shares, but they often hold the stock on individual investors’ behalf,” he explained. “So while the data answer the SEC’s questions, they don’t necessarily answer what the rest of the country wants to know.”

The study found that in 2011, pension funds held the largest share of US oil and gas companies with 31.2%, followed by individual investors with 21.1%, asset management companies (including mutual funds) with 20.6%, IRAs with 17.7%, other institutional investors with 6.6%, and corporate management with 2.8%.

“While most institutional investors do not release information on the characteristics of those whose assets they manage, the data clearly show that these institutional investment entities hold a large share of US oil and gas companies on behalf of middle-class Americans,” the study said. “For example, some 21% of industry shares are held through mutual funds, and the typical owner of mutual fund shares is a middle-class household. In 2011, some 52.3 million households, or 44.1% of all American households, owned mutual funds. Moreover, the median annual income of mutual funds owners in 2011 is $80,000, including 7% of US households with annual incomes below $25,000.”

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