Plunging Oil Prices Force Producers To Lay Off Skilled Workers
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Gas prices haven't been this low going into Thanksgiving in many years. In some places around the country, prices are below two dollars a gallon. For many people, this means some extra spending money, but in Texas it means a lot of people are taking a financial hit. From Houston Public Media, Andrew Schneider reports.
ANDREW SCHNEIDER, BYLINE: Texas rigs haven't gone completely silent. Some companies can still make a profit pumping oil out of West Texas wells, but the state's recent boom came from shale formations like the Eagle Ford in the south of the state. With producers earning less than $40 a barrel for crude, there's simply no way to earn back what it cost to frack and drill such wells. Ed Hirs is an energy economist at the University of Houston.
ED HIRS: We're seeing declines in population across these towns in South Texas.
SCHNEIDER: For nearly eight years, high-paying jobs grew at a blistering pace across the region. Now companies are shutting down operations, and those jobs are vanishing.
HIRS: And until the price returns to a level above 75, 85, $95 a barrel, we won't see a complete re-employment of everybody who's left.
SCHNEIDER: So people are leaving not just the region but the industry in search of work. And what's happening in Texas is being repeated all over the country. The Bakken Formation along the U.S.-Canadian border has been devastated.
HIRS: New wells haven't been drilled in Montana for several months now. In North Dakota, property prices are plummeting, and real estate developments are dropping. And the man camps are empty.
SCHNEIDER: Some will come back when the price of oil recovers, but this is an industry where roughly 70 percent of the workforce is over age 50. That's the legacy of weak hiring during the oil bust of the 1980s and 90s.
TOBIAS READ: I think is going to be an acute problem in a couple of years' time. I think it's going to come bite us extremely hard.
SCHNEIDER: Tobias Read is CEO of Swift Worldwide Resources, an energy recruiting firm.
READ: Many of the people we're losing today through the industry and that are being let go are the highest-skilled and the highest-remunerated and just happen to be the older people in the industry who we've relied on.
SCHNEIDER: Two years ago, the energy sector's big concern was a shortage of skilled workers. Companies were scrambling to train engineers and geologists, pipefitters and project managers to replace those who they were about to lose. Chad Hesters runs the Houston office of recruiting firm Korn Ferry.
CHAD HESTERS: They spent a lot of time retaining, recruiting and training talent. They don't want to see that talent leave. It's incredibly expensive to have people you've spent years training walk out the door.
SCHNEIDER: Many firms are trying creative approaches to reduce labor costs while holding on to key employees, such as offering unpaid sabbaticals. A few, such as Canadian Natural Resources based in Calgary, are trimming wages, paying everyone less but making sure that everyone keeps their jobs.
KARR INGHAM: You almost have to applaud the sentiment behind it.
SCHNEIDER: Karr Ingham is a petroleum economist for the Texas Alliance of Energy Producers. He says that for most companies, Canadians' approach is just not an option.
INGHAM: Even if they're managing to hold their production at some sort of constant level, prices are down by 60 percent in terms of crude oil, so the revenue is not there. It's simply not there to support anything close to a payroll cost that you had a year ago.
SCHNEIDER: Oil and gas companies have laid off more than 56,000 people since December of last year in Texas alone. Worldwide, job cuts have climbed into the hundreds of thousands. Ingham says there's no sign that's likely to end anytime soon. For NPR News, I'm Andrew Schneider in Houston. Transcript provided by NPR, Copyright NPR.