Posted on 12/16/2014 5:20:17 AM PST by thackney
The oil price crash could take thousands of good-paying jobs with it in America and around the world.
More cuts are almost certainly on their way.
On Monday, ConocoPhillips (COP) became the first major U.S. oil company to reveal that it is slashing spending for 2015, a decision the CEO asserted was "prudent given the current environment."
Bad news already started to flow this week: Halliburton (HAL) affirmed that it plans to cut 1,000 positions due to the depressed oil market, and BP (BP) announced an unspecified number of layoffs as part of a $1 billion restructuring plan.
It's true the job losses aren't widespread yet. Oil would have to fall a lot further for many energy companies to become unprofitable. And economists say cheap gas is akin to a $60 billion gas cut to consumers.
But there are reasons to worry. The U.S. shale oil boom has become such a key driver of the economy in recent years, creating well-paying jobs at a time when other industries were scaling back.
According to Fatima Iqbal of Azzad Asset Management, over 15% of total employment gains since the beginning of 2008 have come from the energy industry, even though it is less than 1% of the country's job base.
(Excerpt) Read more at money.cnn.com ...
Maintaining current production on existing wells is far cheaper than continued drilling and expansion. Low prices will mean less drilling, but very unlikely to be complete stop.
When natural gas prices plummeted to a 10-year low in 2012, drillers moved rigs from more expensive shale plays to less expensive ones. Even the same shale play can vary. For instance, the Marcellus Shale had spots that offered a good return for producers, even when gas prices slipped below $4 per thousand cubic feet.
http://euanmearns.com/what-is-the-real-cost-of-shale-gas/
What is the real cost of shale gas? “Some wells are profitable at $2.65 per thousand cubic feet, others need $8.10…the median is $4.85,” attributed to Ken Medlock, Senior Director of Rice University’s Baker Institute Center for Energy Studies
http://services.lib.mtu.edu/etd/THESIS/2012/Business%26Economics/duman/thesis.pdf
There are at least three methods that could help increase domestic natural gas demand and include the passing of legislation requiring the use of low-carbon energy sources, the increase in transition from coal to natural gas for electricity generation and the ability to export natural gas from the U.S. While these three methods would help increase demand, there is no guarantee they will come to fruition and consequently shale gas wells should make every effort to increase profitability while decreasing the breakeven price. This concept was best illustrated in the analysis by assuming twenty years of production with no workovers or re-stimulation efforts performed on the well that shows a breakeven price of $2.94 per mcf in 2011.
15% of the US job growth since 2008 came from this industry. Hardly tiny.
People in oil and gas continued to get huge raises and huge bonuses throughout the recession. I got no raises for several years, healthcare went up, gas and everything else went way up. Then I lost my job, and it took me a year to find another full time job. I’m not saying they deserve it. Not in the least. I am saying they should prepare for things like this. Especially when the new normal is The Suck.
“I don’t know, but if that makes food prices a little cheaper, I am for it. I would hope that a lot of food farming gets more local too.”
Yes, this would be great, but I just don’t see it happening. Increases in the cost of doing business almost always gets passed on to the consumer, but unfortunately it seems that decreases in the cost of doing business more often than not just lead to stabilization of prices - not a drop.
Remember when everyone was pointing to Texas and their job growth outpacing the rest of the US combined? Well...
Absolutely. It is a normal part of the business. I've been out of work for months at a time. I've taken large pay cuts to stay employed. I've moved my family to Alaska and back to follow the work load.
I know people in oil and gas who lost their jobs, but were given 1/2 year salary as severance. They found new jobs. Getting canned turned out to be the biggest windfall of their lives.
Isn’t this like lamenting the loss of jobs in the candle making industry when the light bulb gained market share?
“Creative destruction” means that these people will be able to move to different jobs that have been created DUE TO the low energy prices.
That’s a good thing.
Yep, a lot of jobs get created outside the industry when the oil/gas industry grows.
Texas Housing Sales Booming To Second Best Year Ever
https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=texas+home+sales&tbm=nws
Those jobs leave when ours leave as well.
You believe the oil market is out dated? What did you fuel your car with the last time? Have you bought an all electric vehicle?
Methinks Obama & Reid beat you to the punch.
Kinda odd because gas was under $2 a gallon when Obama took office.
Not a matter of being outdated.
It’s a matter of supply and demand as indicated by price signals.
There’s less demand for oil industry workers at this time, AS INDICATED BY PRICES.
I’m a Sowell man - his econ books explain exactly what happens. It’s no mystery.
As a result of a massive recession and credit crisis...
Then hardly a candles to light bulb comparison.
“hardly”... as if the demand for candles didn’t go down?
Global demand for oil has not gone down, neither is it predicted to go down.
But the supply of oil is growing faster than the demand.
Yes since the economy was in the toilet back when gas was .79¢/gal.
Journalists are liars, there is hardly any truth in what they print anymore.
The French economist Bastiat said that the entirety of economic effects must be taken into account, both those that are easy to see and those that are unseen. In the case of the drastic decline in the price of oil, the effects that are easy to see are those that are concentrated like job cuts or cancelled well drilling. The effects that are more diffuse such as lower costs for users of oil are still important even though they are hard to see.
The truth is that the lower the price of oil gets, on balance, the greater the benefit to the economy. We can test this by asking if the price of oil were to increase by a factor of 10x (or 100x), would this be better or worse for the economy?
A side benefit to the drastic drop in oil is that the receding price makes it even more impossible to hide the full (that is the honest) cost of solar and wind power. This will make government subsidies and sleight of hand via regulation-induced economic distortion even more difficult to be “sustainable”, a concept the left love to scold us about except when it comes to honest accounting.
No, the demand for oil did not drop, but the demand for CERTAIN OIL EMPLOYEES has and that is a good thing. A better comparison than candles is US food production. We used to employ a HUGE MAJORITY of our people just to feed our people. Food demand has NOT gone down, neither here nor worldwide, but technology means that while food demand rises, the demand for certain food workers vanishes, and that is a good thing, for the world, for humanity, for the US.
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