US Oil Rebounds, Slated for Job Growth

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.

Sources:

https://www.bloomberg.com/graphics/2017-oil-rigs/

http://calgaryherald.com/business/energy/as-u-s-shale-oil-drilling-rebounds-80-thousand-jobs-find-few-takers

http://business.financialpost.com/news/energy/another-8700-oil-jobs-are-at-risk-if-prices-drop-below-us50-according-to-new-study

8 thoughts on “US Oil Rebounds, Slated for Job Growth

  1. Is there a possibility that this greater supply of oil will focus the US workforce on that source of energy and lead companies to disregard sources of renewable energy? Given that the US has an infrastructure currently tailored to oil, I believe that an increased supply of that resource will discourage research into others area of energy, and therefore have a negative effect on the growth of renewable energy research.

    • I would be surprised if the increased supply of oil will have a truly significant effect on reducing R&D of renewables. Despite the continued availability of oil, sensible companies with long term plans will certainly continue to factor the emergence of renewables into their plans. I believe most know that eventually renewable sources will become a dominant energy force in the future, so I doubt renewable research will decline as a result of increased oil supply.

  2. Given President Trump’s proposal to cut the EPA’s budget and other funding towards renewables, I think current political environment in the US favors a continued rebound in the oil industry. It will be interesting to see how it plays out in the upcoming years,

  3. This is an interesting article. I am interested to see what the OPEC agreement cuts will have on all of this development. It seems that in regards to Oil related news, OPEC is the supreme-macro influence on oil markets. Watching the American labor market in response to varying oil demands will be important as well to the overall oil economy. Yet, as always, it is important to make sure that this oil rebound is justified intrinsically in the growth of supply, etc.

    • OPEC agreement’s to cut oil production (if they do comply to it) is most likely going to cause U.S. oil producers to boost production. While the oil crisis in 2016 caused loan default rates of U.S. drilling companies to reach an all time high, many U.S. producers have since then shed their liabilities and increased their productivity- through new drilling techniques that have lowered the point at which they can turn a profit. According to Kate Richard, CEO of Warwick Energy, “What OPEC has shown is that it clearly cannot stomach $40 to $50 oil, whereas the U.S. producers over the past two years have gotten more and more efficient”. Due to improvements in cost structure, there remains ample room for the U.S. producers to expand, especially in response to higher prices.

      http://www.cnbc.com/2017/03/14/opec-us-shale-showdown-biggest-oil-risk-of-2017-says-energy-investor.html

  4. While I think Trump’s cuts to the EPA may slow the decline of fossil fuel use, I don’t believe it will reverse the trend of an increased use of renewable energy. The technology for these renewable energies will only improve making it more cost-effective to use such energy. I find it interesting that part of Trump’s cuts included in his proposed budget are job training programs in the coal industry. Either way I do firmly believe fossil fuels are on their way out although we will see a slowing decline during Trump’s presidency.
    https://www.theatlantic.com/business/archive/2017/03/trump-budget-dol/519933/

  5. Well, there will not be an oil spill as a result of the fourfold increase in drilling. Another spill like the BP incident in 2010 would be devastating. If there are continued labor cuts along with the increase in drilling, the probability of a disaster happening increases greatly.

    • Interesting point. I’d be shocked though if companies aren’t taking greater measures to avoid something like that considering how bad the BP spill was. Having said that, accidents do happen. Especially when there needs to be more production with less employees.

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