Falling Crude Oil Prices Lead to Oil Company Layoffs
By Burt Carey
Crude oil traded at just $40 per barrel last week, adding to the dramatic downfall in gasoline prices at the pump for consumers. But cheap gas isn’t being heralded by more than 100,000 American workers whose jobs have disappeared since June 2014 because of it.
Oil giant ConocoPhillips announced this week that it will lay off 10 percent of its workforce, some 1,800 jobs in total, and 500 in its Houston headquarters alone. ConocoPhillips said 400 workers plus another 100 contractors in Canada will be affected, which was even more painful news for a country that announced Tuesday it is now officially in economic recession.
The latest layoffs follow a familiar pattern for the oil industry. When crude oil drops below $100 a barrel, industry execs start tightening their belts to make up for lost revenue. Industry giants Schlumberger, Halliburton and Baker Hughes have already eliminated more than 70,000 jobs dating back to late 2014. Chevron and BP have cut a combined 10,000 jobs.
“Our industry is undergoing a dramatic downturn, which has caused us to look at our future workforce needs,” said Daren Beaudo, ConocoPhillips’ director of communications. “As we have assessed the implications of lower prices on our business, we’ve made the difficult decision that workforce reductions will be necessary.” Beaudo said the company has already undergone spending cuts and reduced its plans for deep-water exploration.
With a ban on exporting American crude oil now in its 40th year, oil industry executives are imploring Congress to overturn the ban so that fewer jobs will be lost. But a government report released today by the Energy Information Administration argues that lifting the ban would do little to boost prices or production because other petroleum-producing countries, including OPEC members, would continue producing, and crude oil prices would fall even further.
Worldwide job cuts since crude prices started slipping now total an estimated 176,000 workers. North America has suffered the brunt of the layoffs because much of its newest oil comes from shale fields throughout the Midwest. Shale oil production is more expensive than other crude oil production.
Especially hard hit have been oil-producing states North Dakota, Texas, Louisiana and Oklahoma. North Dakota had the country’s lowest unemployment rate until this spring. Of the nearly 200 rigs in the state, fewer than half are now in operation.
The West Texas Intermediate crude price dropped slightly below $40 a barrel last Friday but has rebounded this week to about $44. The WTI is the benchmark for U.S. oil prices. U.S. crude sold for $93.96 in August 2014 before falling to $43.46 in March.
Industry analysts have predicted that gasoline prices at the pump will drop yet again after Sept. 15. That’s the date refineries begin delivering winter-grade petroleum to gas stations throughout the country. Federal air quality regulations by the EPA require stations to sell a more expensive summer blend during the warmest months.