Oil's Slide Cuts Jobs by Thousands

(USA Today, April 1, 2015)

Planned oil industry layoffs in the U.S. are approaching 100,000 in the past four months with more likely to come. Oil producing states such as North Dakota, Texas, Oklahoma, and Louisiana are the brunt of the cutbacks as consumers are enjoying cheaper gasoline prices brought on by a 55% drop in crude oil prices since June 2014. About 91,000 energy related job cuts have been made public since early December, according to Continental Resources, the Oklahoma City based oil producer, which has been tracking companies’ layoff announcements. They came from oil exploration and production companies, oilfield services companies and manufacturers, such as U.S. Steel.

Oil and natural gas producers, including Chevron and BP, have said they are chopping 10,000 jobs. Manufacturers, such as those that make steel for oil pipes and storage tanks, plan about 11,700 job reductions. On the other side, low oil and gasoline prices should spur more consumer spending, a stronger economy and average monthly job growth of 270,000 this year, up from 260,000 in 2014.

Shrinking oil industry jobs are changing states’ economic fortunes. New drilling techniques that siphon crude oil from shale rock fueled gigantic job growth in the states of North Dakota, Texas, Oklahoma, and Louisiana. In North Dakota, mining employment declined by 600 jobs in February alone, according to Labor Department reports. There are currently 96 active drilling rigs in the state, down from 194 one year ago, according to the state Department of Mineral Resources.

Comment: The vast majority of U.S. drivers get very excited when gas prices decrease and many get angry when prices increase, with no thought on the effect of job growth or reductions. For many years, the U.S. residents have been told that we need to be less dependent on foreign oil and more reliant on oil produced domestically. Is this the time to enact such a position? If so, many export/import issues would need to be resolved. Easy question but thorny situation.

As mentioned in the article, many thousands of jobs benefit from low oil prices and many thousands of jobs benefit from higher oil prices. Where is a happy median? I guess that’s dependent on which side of the issue you land. Also, what is the best long-term solution for the U.S.? Also, if the U.S. was able to curtail all foreign oil, what would be the effect on other countries. A lot of questions and very few answers.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics