“I know how to get along with humble means, and I also know how to live in prosperity; in any and every circumstance I have learned the secret of being filled and going hungry, both of having abundance and suffering need. I can do all things through Him who strengthens me.” Phil 4:12-13 (NAS)
[ More than 1 in 100 of all workers in the U.S. will be directly affected by falling oil prices and slowing production.]
After a decade-long boom in both oil production and job growth, the oil industry may be in for a major setback in 2015. Crude oil is trading below $50 a barrel, and drilling is grinding to a halt in the U.S. because few shale producers can drill new wells that produce oil economically for $45 to $50 a barrel.
As the industry slows to a crawl, companies are beginning to announce layoffs. It’s a natural by-product of a slowing business environment, but it could come as a rude awakening for thousands of oil industry workers around the country.
Some companies are already beginning to lay off workers; public releases put the job losses at 31,000 by late January, a number that will continue to rise sharply throughout 2015.
Energy industry service provider Schlumberger (SLB) has made the most dramatic move, cutting 9,000 workers in anticipation of slowing revenue this year. The company provides a variety of products and services to shale drillers, so as activity slows down, so will its business.
Fellow service supplier Halliburton(HAL) announced 1,000 job cuts in December and on a recent conference call said it expected more layoffs in the near future.
Baker Hughes, which Halliburton agreed to acquire late last year, just announced 7,000 job cuts, 11 percent of its workforce. By the time the merger closes in late 2015, the combined entity could be significantly smaller than anyone expected.
“We will have to make reductions to our structure as any prudent business would,”
Halliburton CEO Dave Lesar, adding that market conditions are driving the layoffs, not the merger.
No matter the reason, when three of the largest oilfield service providers in the country are announcing layoffs by the thousands, it’s troubling for the industry.
If oil stays below $50 a barrel, the industry could be in for major cutbacks in 2015, and I wouldn’t be surprised to see a handful of highly leveraged oil producers go out of business. At least 31,000 jobs have already disappeared from the energy industry within the last few months, and if the price of oil remains this low, that number will easily top six figures by the end of the year.
This is the boom-and-bust nature of energy in the U.S. It’s really good when energy prices are high, but when the market busts, the U.S. oil drilling industry could quickly become a ghost town. Read More Here.