Since 2014, the oil and gas industry has faced pressures from the pricing fight with Saudi Arabia to try and take over market shares and profits. According to Deloitte, any change in pricing from 2014 to 2019 affected an estimated 3,000-4,000 jobs. However, when it would swing in the industry’s favor, many jobs were added back to keep up with the demand.
Due to COVID-19 and its long-lasting effects on the industry, Deloitte predicts if oil stays around $45 per barrel, 70% of those jobs won’t come back till the end of 2021. Other forces affecting the market are political stability in the United States due to it being an election year, as well as the risk of economic growth with the virus. According to S&P Global, if consumer behaviors result in staying home for work or something similar, an estimated 2.5 million barrels of oil per day will be lost in the long-run.
Paired with recent layoffs, changes in the oil and gas sector for companies like Shell, BP, Total, Equinor, and more are a result of their commitment to reaching “net zero” emissions by 2050. This, along with the struggles the industry faces currently, will result in at least 20,000 additional jobs being lost. Read more about market uncertainty in our previous article.
While there may be some fresh faces to the industry that could lose their positions, most in the young age group have fewer worries due to their mathematical and technical skills assisting in the digitization for low-carbon emission operations. Instead, Deloitte noted in their study that many of the existing workers are nearing retirement in the next five to seven years and 50% of the workforce in the industry is “tenured.” The reason for selecting this age group for layoffs is due to the lack of institutional knowledge needed for future plans and projects. While some companies, such as Shell, are showing signs of investment to have older employees trained to have the institutional knowledge they lack, not all companies can invest that much money, especially with the financial effects currently from the pandemic. According to the International Energy Agency, companies implement an estimated 1-2% of capital for clean energy investment. This is a large financial risk for many, leading towards the option of layoff rather than retraining.
Although the industry has been heavily impacted as a whole, major oil and gas towns, like Houston, face harsh regional impacts due to a good portion of overall income coming from the oil and gas industry. Periods of price changes are estimated to have a long-term impact on these towns, and warnings from the study show if no changes are seen soon there will be some harsh consequences for those regions. Some experts believe that the periods of change will interfere with the way the industry becomes more progressive, implementing efforts to strive for sustainability, operational agility, and workforce improvement. However, some industry leaders shake off the worries, as it is part of the pricing cycle that has occurred for years. According to a source from Fortune, the report notes that those leaders believe it’s “just another bust before the boom.” Whatever happens, many must prepare for the shift in the sector that will become another fight in a competitive market.
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HFG is an independent financial planning and wealth advisory firm serving individuals, families, and business owners in The Woodlands, Port Arthur and the Beaumont area, as well as nationwide. We have extensive experience assisting individuals and businesses in the energy and related industries. With over 35 years’ experience, HFG’s seasoned staff is well-versed in providing invaluable guidance related to your 401k, pension benefits, insurance, supplemental pension, stock grants, etc.
If you or someone you care about is currently being impacted by the effects of the coronavirus pandemic on their employment outlook, please contact us directly at 832.585.0110 or service@hfgwm.com. We’re eager to listen and create a plan that’s suited to each client’s specific aspirations.
