It has been a rough-and-tumble ride for the oil and gas industry in 2015 as prices have continued to search for their “bottom” all year.
Even as the New Year looms, prices are sitting around $37 a barrel, their lowest spot since the Great Recession of 2009, according to the DailyFX Market News and Analysis website.
Oversupply has wracked oil markets as shale oil producers in the U.S. have continued to pump more black gold to try to shore up their finances. More than a dozen companies have filed for bankruptcy, unable to pay their massive debts that financed their hydraulic fracturing (fracking) and exploration of shale plays.
Dozens more oil companies remain on shaky ground, some attempting to reassess their debt with creditors, others attempting to weather out the storm with stock and asset sales.
Rig counts are down across the country by 1,140. Let that number sink in. Only 700 rigs remain in operation; 538 in oil and 162 in gas, according to Baker Hughes’ Dec. 23 rig count report.
What does 1,166 lost rigs look like? If we go with a rough average of 100 people employed per rig (that includes multiple rig shifts, truckers, contractors, etc.), that is potentially more than 100,000 jobs gone across the entire country.
The Eagle Ford Shale has gone from 204 to 77 operating rigs, a loss of 127. DeWitt County dropped 15 rigs to end up at 13, and Lavaca County lost seven to end the year with two.’
In Texas, mining and logging had lost more than 30,000 jobs since December 2014.
Manufacturing has lost more than 35,000 jobs, and the overall labor force fell substantially, by nearly 200,000 workers, for the first time in recorded data, according to the Bureau of Labor Statistics.
The Bureau’s data, which goes back to 1976, shows the overall labor force has never suffered a significant movement of labor similar to the current upheaval, even during the oil bust of the late 1980s and early 1990s.
While nearly 50,000 of those jobs have been recovered, the oil industry is not contributing to that rebound.
The weakness in oil prices is leading the oil and gas industry to announce new rounds of cuts. Europe-based Royal Dutch Shell recently announced it will cut an additional $3 billion in capital expenditures and up to 2,800 jobs this year; 250,000 jobs have been lost globally, according to a November article by Bloomberg.
Some potentially good news has begun to pop up; in December the nearly 40-year-old U.S. oil export ban was repealed, giving oil companies the chance to export their oil to the global market. The potential affect of this policy shift may already be seen: on Dec. 23, West Texas Intermediate overtook Brent crude for the first time since January. The price gap between the two may indeed have been reversed, but it is far too early to tell if this is indeed the case or if it will stick.
What is known is this: if prices remain at or below $40 a barrel through 2016 (a prediction made by many analysts who are notorious for getting price predictions right) many more oil companies will fall.
(c)2015 Victoria Advocate (Victoria, Texas)
This article was written by Rye Druzin from Victoria Advocate, Texas and was legally licensed through the NewsCred publisher network.