The now $55-a-barrel oil prices have been keeping steel pipes in excess demand domestically. Dropping oil prices in the last couple of years have given oilfield-equipment companies a significant surge in sales towards onshore drilling, so much so that these domestic sales have surpassed sales abroad. These firms are having difficulty meeting this demand, struggling to hire employees to haul the gear, even at a minimum $80,000 a year salary. As oil prices have rebounded following the large drop early last year, more wells have been tapped and the industry is growing.
Another result of this recent surge is a much higher expenditure on US and Canadian drilling, which is expected to climb three to four times more than the worldwide average this year. The latest rig technology and extraction methods will but pressure on wages as well, causing oil companies to shift their hiring strategies in order to fulfill the workforce demand. Rehires have become particularly important. For example, TMK Ispco, a gear supplying giant set payroll records last year by improving employee benefits and wages.
Despite the impressive industry rebound in the US, oil and pipe supply companies are not comfortable yet. Labor cuts are still outpacing new hires for most large oil companies and regions, while welling activity continues to grow. Firms are adjusting their target oil prices in accordance with these labor pressures, lowering the safe threshold oil price. Should oil prices reach comparable peak levels we’ve seen in the past, there could be extreme effects to further workforce cuts.
Overall, the news is positive across the US. Crude oil pricing has reached a stable level, driving more activity up and down the supply chain. Although increased competition has put strains on larger companies’ capacities, profits should begin to flow as supply grows. New contracts up the value chain will spur activity for all oil-related industries in the US, and recent budget proposals will act to support US firms in a rebounding crude oil environment.