Economy

The epidemic caused the disappearance of 107,000 oil and gas jobs. Most of them will not return soon

An astonishing 107,000 jobs from the US oil, gas and chemical industry disappeared between March and August 2020, according to a report analyzing Posted this week by Deloitte. It is the fastest layoff rate in industry history – and it doesn’t even include the countless people who have taken time off or taken wage cuts.

The vast majority of these energy jobs are unlikely to return anytime soon.

Deloitte’s analysis found that even if US oil prices remain at $ 45 a barrel through the end of 2021, 70% of the jobs lost during the pandemic in the oil, gas and chemical industry may not return by the end of next year.

“Such large-scale layoffs challenge the industry’s reputation as a reliable employer,” the Deloitte report said.

Part of the problem is that the boom-and-bust oil and gas industry fortunes are more closely tied to commodity prices than in the past.

Deloitte found that a $ 1 change, up or down, in US oil prices could affect 3,000 jobs in exploration and production services and oilfields, compared to 1,500 jobs in the 1990s. In other words, the link between jobs and prices is two times stronger than it was at the time.

This shift reflects the rise of oil shale, which made the United States the largest producer of oil and natural gas in the world in 2012. Unlike conventional oil and gas projects, shale is short-lived in nature because it can be condensed or reduced based on price fluctuations that affect hiring and firing decisions. .

Oil prices are below zero

Oil prices have been particularly hard-hit by the epidemic, which has caused a record collapse in demand for jet fuel, diesel and gasoline.

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The situation was exacerbated by oversupply. As the epidemic approached, the United States was producing close to record amounts of crude oil. Then Saudi Arabia and Russia engaged in an epic price war that inflated the glut, causing the oil industry to nearly run out of space to store all of the excess barrels.

That unimaginable double whammy caused American oil Crash below zero For the first time in history. While crude has recovered since then, oil companies have pressed the brakes on production and quickly cut jobs.

Heavy job cuts from Exxon, BP and Shell

Earlier this week, ExxonMobil (XOM) She plans to Layoffs of up to 1,600 workers in Europe As part of a comprehensive global review. Exxon Included Nearly 75,000 employees at the end of last year.

“Significant measures are needed at this time to improve cost competitiveness and ensure that the company is managed through these unprecedented market conditions,” Exxon said in a statement.

Lower energy prices translate into layoffs and bankruptcy in the oil state of Texas
Exxon is losing money for the first time in decades and it was recently Expelled from the Dow Jones Industrial AverageHaving been a component of the index since 1928. It was once a company Most valuable in the world, It has lost $ 300 billion in astonishing market value since it peaked in mid-2014.
Last month , Seashells (RDSA) Announce plans for 9,000 jobs cut Around the world as it turns away from fossil fuels.
BP (BP)Which plans to cut oil production by 40% 10,000 layoffs.
Schlumberger (SLB)The world’s largest oilfield services company said in July it would cut 21,000 jobs.
Schlumberger CEO Olivier Le Buch said: “This quarter has probably been the most difficult in past decades.” statement In July.

The dangers of brain drain

Even the normally stable refining and chemicals sector in the industry has cut as much as 35,000 jobs, Deloitte said.

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The danger is that these mass job cuts lead to a brain drain as talented workers flock to technology, consulting, and other industries that may have a brighter future.

The oil industry’s ability to re-hire laid-off workers will depend largely on the price trajectory.

If the price of US crude oil bounces to $ 55 a barrel and stays there until 2021, Deloitte estimates that 76% of the jobs lost during the pandemic could return.

Then again, in a pessimistic scenario where oil remains at $ 35 until next year, only 3% of those jobs would return, according to the report.

Collision with the climate crisis

But it’s not just a matter of where the prices will go next. The other big X factor is How is the industry responding to the climate crisis And the rise of socially conscious investing.

“Covid-19 has rapidly accelerated the specter of peak oil demand, worsened the investment climate and investor appetite for fossil fuels, and reminded organizations to take the energy transition seriously,” Deloitte said.

BP says the world may never consume more oil than it did in 2019
It is a big problem, reflected in the shrinking of the energy sector’s footprint in the stock market. While Tesla (TSLA) Other clean energy companies are booming, and the use of fossil fuels has declined. In fact, it was Exxon last week It was briefly surpassed in the market assessment by NextEra Energy (No)The wind and solar power company is unknown.

Worse, it is becoming harder for fossil fuel companies to raise money.

The report said the weighted average cost of capital now stands at 8% to 10% for oil and gas – twice the cost of renewables.

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Deloitte urged oil and gas companies to embrace sustainability as a way for business and use the pandemic as a “wake-up call” to decarbonize their business.

“The transition will not be easy, because many oil, gas and chemical companies are” struggling to survive, “the report said.

Thelma Binder

"Explorer. Devoted travel specialist. Web expert. Organizer. Social media geek. Coffee enthusiast. Extreme troublemaker. Food trailblazer. Total bacon buff."

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