While we constantly analyze short-term data, the industry has a longer-term problem. And it is not related to what lies below the ground.
There is a retirement tidal wave that could wash over the oil and gas industry over the next few years. The seeds of this crisis were planted in the late 1980’s after the last major oil bust. Oil prices crashed after Saudi Arabia became fed up with losing market share, and beginning around 1986, it pumped flat out in order to force out other producers. The price of oil crashed and a lot of US drillers cut back. That led to layoffs and a much lower level of new hiring.
As a result, a lot of oil workers still around today began working on rigs before the 1980’s crash. With fewer younger workers to take their place, the industry could lose a lot of workers. By some estimates, half of the entire US oil workforce could retire in the next five to seven years. Related: America’s Shadowy Energy Partnership With Azerbaijan
But the problem is that we are in the midst of another oil bust. The collapse in oil prices in 2014-2015 is leading job eliminations, not new jobs added. That could make it difficult for oil producers in the future to find qualified people, let alone retain the young bright minds already working in the sector. An estimated 125,000 workers across the world have already been purged from the industry.
Just take a look at a few examples in recent months. Schlumberger announced in April that it would scrap 11,000 positions. Fellow oil field services company Halliburton cut 9,000 jobs a few months earlier. BP issued pink slips for workers in the North Sea and Houston. Related: Russian Gas: There Is No Alternative For Europe
The first cuts tend to happen in less technical fields – human resources, sales, marketing, and other specializations that do not involve engineering. Those engineers are the last to go, but even some engineers have lost their jobs amid the slump.
Some companies are willing to take on the extra costs in order to retain good people. Continental Resources’ Harold Hamm said at IHS CeraWeek in April that his company wasn’t issuing layoffs even if they were not drilling any wells. Related: Are US Drillers Actually Making A Comeback?
That is because once they are lost, it will be hard to bring back that human capital.
Still, even if bright minds can be retained, the graying of the workforce should be a major concern in corporate board rooms. Thousands of workers will be packing up and heading home over the next few years, and oil companies don’t yet have a plan for what to do about it.
By Charles Kennedy of Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- M&A The Only Survival Strategy For The Oil Sector Now
- U.S. Could Go All Out On Offshore Exploration
- The Latest Casualty In Energy’s Hardest Hit Industry
