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Andrew Topf

Andrew Topf

With over a decade of journalistic experience working in newspapers, trade publications and as a mining reporter, Andrew Topf is a seasoned business writer. Andrew also…

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100,000 Layoffs And Counting: Is This The New Normal?

100,000 Layoffs And Counting: Is This The New Normal?

This time a year ago, the oil industry's biggest problem was finding a way to deal with the “retirement tsunami” about to crash down on it as older oilfield workers hung up their cork boots to enjoy freedom-55. Now, with oil prices still in the doldrums, many of those same workers are lucky to be hanging onto their jobs, while others have been booted from the payroll as an ugly wave of layoffs takes hold.

One of the worst-affected areas is the Canadian oil sands, where a higher per-barrel cost of production than conventional sources has oil companies scrambling to cut capital expenditures and in several cases, put long-term projects on ice.

On Thursday one of the region's big players, Husky Energy, announced that about 1,000 construction workers employed by a contractor at its Sunrise oilsands project, would be issued pink slips. The bad news for the workers came a day after Husky said that it had started to produce from the $3.2 billion, steam-assisted gravity drainage (SAGD) Sunrise operation, which it co-owns with BP.

Related: Oil Limits Could Undermine Our Entire Economic System

The layoffs by Husky followed Suncor's decision in January to cut 1,000 employees and Royal Dutch's Shell's announcement that it will shed close to 10 percent of the workforce at its Albian sands project – around 300 workers.

The Canadian Association of Oilwell Drilling Contractors, which closely tracks drilling activity, said in February that up to 23,000 jobs could be lost as the number of rigs fall. Since the price started dropping last September, about 13,000 positions in the Alberta natural resources sector, mostly oil and gas, have been eliminated, according to Statistics Canada.

Related: The Real Problem Behind Low Oil Prices

The bloodletting among the oil majors and their vast web of ancillary services has of course extended to the United States – which appears to be taking far more casualties than Saudi Arabia in the battle for marketshare. In January oilfield services giant Baker Hughes said it will lay off 7,000 employees, about 11 percent of its workforce; that number was rivalled only by its competitor, Schlumberger, which let go 9,000 workers. Shell, Apache, Pemex and Halliburton are among major oil companies to issue recent pink slips to the growing army of unemployed oil workers. In the U.S., the worst pain is, not shockingly, expected to be felt in Houston. Assuming a one-third reduction in oil company capital expenditures this year and 5 percent in 2016, the hydrocarbon capital of the world could lose 75,000 jobs, in a city that has added 100,000 new positions every year since 2011, said a professor at the University of Houston.

The oil jobs nightmare is in fact spreading like a cancer. According to Swift Worldwide Resources, “the number of energy jobs cut globally has climbed well above 100,000 as once-bustling oil hubs in Scotland, Australia and Brazil, among other countries, empty out,” Bloomberg reported recently. Examples include foreign-trained engineers whose promise of employment at LNG plants in Australia have evaporated as projects get delayed; development projects halted in Brazil resulting in the closure of international schools and the relocation of workers; and 8,000 Mexican workers left without paycheques after Petroleos Mexicanos slashed contracts and purchases, Bloomberg said.

Related: Middle East Oil Addiction Could Spell Disaster

Of course, industry defenders say the oil and gas business is boom and bust by nature, and most veteran oilmen have gone through many a cyclical downturn and lived to fight another day. The question of whether or when the oil price will recover and all those laid-off workers are rehired is best left to the prognosticators. In the meantime, there is a danger in oil companies cutting too deep, according to oil and gas industry recruiters. They say firms that lay off too many workers will put pressure on older workers who may opt for early retirement. That could leave companies in the same situation as the 1980s, when an oil downturn meant few businesses hired and new graduates went into other more promising fields, leaving a serious talent gap.

“They will be very careful about reducing staff, because they’ve seen cycles like this before where commodity prices are weak for a certain period time, they lay off employees and they’re not well-positioned to get access to high-quality talent,” said Mike Rowe, vice president of exploration and production research at Tudor Pickering Holt, an energy investment and merchant bank, in a story run by CNBC on how the layoffs could come back to haunt the industry.

By Andrew Topf of Oilprice.com

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  • sharonsj on March 18 2015 said:
    I don't see a comparitive price drop at the pumps, especially in PA where they just added a 10 cent tax. Nor do I see related products such as plastics going down in price. I wonder why?
  • Larry on March 18 2015 said:
    "Cheap oil is costing 100,000 jobs" ... this is a BS article ... sure there will be job losses in the oil industry accompanied by even greater job gains in the other industries. With $Billions more in their pockets consumers will buy more goods which yields more manufacturing jobs. The reduced cost of production brought on by lower energy costs yields lower overall prices (in a free market) which yields even more $$ in the pockets of consumers and therefore more jobs .
  • Skooter on March 20 2015 said:
    The big picture, which seems to be lost to the mainstream, is that the net energy or benefit from oil is in decline, due to ever diminishing quality. Energy is the lifeblood of any economy, both economically and biologically, and crude oil is the key resource in all modern economies. As net energy declines, the surplus benefits diminish and economic growth slows or becomes stagnant, along with a drop in aggregate living standards. Unless equivalent or better substitutes are found for fossil fuels, economic decline over the long term is a certainty. Stagnation and volatility is the current trend, and the next macro pattern, according to the fundamentals, will be aggregate decline, offset by efficiency gains through technology and behavioral adaptations. When the economy is examined from a biophysical standpoint, price volatility and economic instability, characterized by oscillations with ever decreasing intervals between peaks, are to be expected. Also, there are causal time delays between supply and price and demand, so don't expect instant correlations between energy production and the myriad effects downstream...
  • east Texas on March 21 2015 said:
    Oh yeah, I'm in Houston, right in the middle of it. Job shop, making machined parts for Halliburton and Baker, etc.
    I'm ok so far, but all around me people are being laid off. Young men with kids at home, losing income and health insurance.
    For geo-political reasons, because of the war on Russia and Venezuela and Iran...
    Everyday I go to work I think 'is this my last day'? My wife is ill and I need health insurance. Maintenance medication.
    I'm paying down debt. I need another year or so pay it off. If I'm laid off, it's bankruptcy.
    What the hell, I want to work!
  • rpm3165 on March 21 2015 said:
    Skooter has it right. The majority of US shale oil and gas drillers have not made money when oil prices were higher and they make even less money today. At the same time the oil majors continue to see a negative gap between the increasing cash flows required for large projects in the face of diminishing resource returns. The Oil and Gas Industry is simply spending significantly more money for less oil resource in return and increasingly unable to control their boom to bust cycles.
  • Sean on March 21 2015 said:
    Consumers have been taking it up the ass from oil companies for decades. Maybe it's time to seriously research and develop an alternative to oil.
  • George on March 22 2015 said:
    Sean, that is such a broad unsubstantiated statement. It costs money to bring oil out of the ground and get it to the pump. Now that the middle eastern producing nations are flooding the market with oil and driving down the price, you are seeing proof that it costs the US energy producing companies lots to bring it to market as they are shutting down many operations. This is because they are losing money. Don't just drink the kool-aid that the liberal folks are passing around. Do some research and find out the facts.
  • Ghost of Christmas Past on March 24 2015 said:
    It was a lean Christmas for thousands of oil workers, at all levels, in 1986. But this bloodletting may surpass even that. It took professional engineers, etc. in Oil years to get back into their field. Even then, they often had to start out in lower positions and work their way back up. Again.

    By the time this market recovers, there won't BE any older, more experienced professionals to train the next wave. Just a lot of intermediate level professionals who got culled way too soon.

    Cheap energy won't do squat for manufacturing after those good paying jobs go away and people quit buying. Leading to more layoffs. Eventually people will quit having to move those refrigerators. Won't have to move those color TVs. No money, no nothing...even the chips ain't free.

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