As Oil Price Increases, Does Employment Follow?



As Oil Price Increases, Does Employment Follow?
Crude oil prices and rig counts are rising in the US and many are wondering how this will affect industry employment.

As the oil and gas industry welcomed higher crude oil prices in 2017 and ushering in 2018, industry employment also saw a reprieve from massive layoffs. The United States is in recovery mode and it has created a different employment picture than years past.

“There’s a general sense for some people that there’s a certain price per barrel under which no hiring takes place and over which a lot of hiring takes place. It’s not really like that,” Karr Ingham, Texas oil economist, told Rigzone. “Anything that would tick up the rig count or other measures of [exploration and production] activity won’t necessarily take employment up with it.”

For the majority of 2017, the industry operated under $50 (WTI) oil.

“Fifty-dollar oil in the recent environment or early recovery stage isn’t really the same as $50 in the overheated environment because costs went down significantly,” he said.

Still, after the prolonged downturn and employment bottoming out, the industry returning to $50 oil was sufficient to “stimulate pretty significant upstream oil and gas hiring,” said Ingham.

According to revised data from the U.S. Bureau of Labor Statistics, the oil and gas industry added tens of thousands of jobs in 2017, the vast majority coming in oilfield services, or support activities.

 

In the energy hub of Houston, the energy industry employs 85,700 workers and while the recent upturn in drilling has induced hiring in oilfield services, E&P and equipment manufacturing continues to cut staff, according to the 2018 Houston Employment Forecast by the Greater Houston Partnership (GHP).

Today’s layoffs are more strategic as companies restructure to operate in a long-term, low-price environment. The GHP anticipates more job cuts in 2018, but in E&P white collar jobs, not oilfield services (blue-collar jobs).

“The cuts will be shallow compared to the layoffs of 2015 and 2016 … the forecast calls for oilfield services to add jobs, exploration and production to cut jobs, mergers to force more economies of scale and companies to continue consolidating operations into Houston,” GHP states.

Overall, Houston expects energy employment to be flat in 2018.

“If oil prices were to fall again, would that somewhat stop hiring in its tracks … at some point, the answer to that is ‘yes,’” Ingham said.

The rig count in the United States continues to increase, but with the “do more with less” approach, the industry has been able to produce plenty of crude to the marketplace despite any rig count fluctuations.

If the industry doesn’t need as many rigs at work to produce crude, there may not be a need for as many employees, said Ingham.


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WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

James D Drouin  |  March 10, 2018
"As Oil Price Increases, Does Employment Follow?" Well, one lesson that I've learned in my travels, is that "experts" are no wiser or smarter or, or, or, than "non-experts". So, from my 'non-expert' perspective, the contention that higher prices (for any commodity) do NOT lead to increased employment is just plain nonsensical. It's not a direct relationship, but there is a very, very, very, strong indirect relationship.
Lamar Green  |  March 05, 2018
One would think that significant part of the problem is that "vision" as it applies to the industry fails to extend beyond the current balance sheet! I would bet on one wildcatter over a thousand MBA's in all but the most dire economic weather!
Kay Gietz  |  March 02, 2018
The Houston EPC community has been replaced by offshore high value engineering centers aka, Low Cost Engineering (LCE). In other words, cheap 3rd world country engineers who work for a fraction of Houston's former pay rate. We were forced years ago to train them, and now they are replacing us. You can no longer get a high paying job as a refinery/chem plant engineer in Houston, even with a PE, PhD, or advanced degree. The bad news is that the few remaining management in Houston have to be able to check their work and correct it. They don't know the suppliers like "we" do, or the plant operation protocols, and don't have a face to attach to a name. It's sad, but I don't think we'll ever get our old jobs back, and the expertise will be forever lost.
Fred  |  March 02, 2018
The problem with drilling is old school drillers. They are completely moronic. Removing them from any facet of drilling should be top priority of any drilling company.
Scott Smith  |  February 28, 2018
As the engineering aspect continues to rise and be such a great solution to eliminating human flaws, so has the increase of cost for monopolized inferior parts and software designed to wear out and be replaced. To all the B. Wells out there, I've seen as many flaws with AI as with humans, so pick your poison and consider an economic balance if there is such a thing. I'll place my bet on the people, and that is how countries were made not corporate stature. S Smith offshore WORKER.
Alan Millar  |  February 28, 2018
As one of the workers fortunate enough to still be out there, it is all good and well that prices have been cut and improved performance achieved, what about the current workers salaries, we have endured close to a 50% decrease since the downturn started, have had no increases since then to compensate for inflation, so effectively, we are worse off as each year passes and is at a point, is it worthwhile for all what we sacrifice being offshore, working onshore is looking more and more attractive and one can be with ones families
B. Wells  |  February 27, 2018
The shift to more AI, automation and hands off approach has been pushed for many years for various reasons. In an inherently dangerous business, the safety cost, in lives and dollars, has driven companies for years to reduce the human exposure. Engineering drives the need for consistency and by removing humans from the equation it can be more easily achieved. Let's face it, people are expensive, unreliable and have flaws. They show up late, make decisions based on individual needs, are motivated differently and are just human. AI is an engineers dream. No push back, no outside of the box thinking, and no flaws that can not be fixed by tweaking or replacing the component. Maybe it is time to look into becoming a cyborg.