U.S. oil and gas companies have served as an engine of growth through much of an otherwise lackluster economic expansion, providing steady employment, solid wages and fierce competition for workers across wide swaths of the country.
But now, after a roughly 50% plunge in oil prices, The Wall Street Journal reports exploration and production companies are cutting capital budgets, service companies are weighing layoffs, and non-energy firms that popped up to support the industry are bracing for a protracted slowdown.
One company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren’t renewing contracts for its offshore drilling rigs in the Gulf of Mexico while crude prices are depressed.
“It’s been breathtaking,” says Jim Noe, executive vice president of Hercules, which was founded in 2004. “We’ve never seen this glut of supply and dislocation in oil markets. So we’re not surprised to see a significant decline in demand for our services.”
Lower oil prices are still expected to provide an overall boost to the U.S. economy. Consumers are spending less on gasoline and more at retailers and restaurants, while many companies are benefiting from cheaper costs for energy and raw materials, which spurs hiring outside the energy sector. Money that would have gone to imported oil—the U.S. remains a net importer—will remain at home. Still, for the energy industry, the belt-tightening is starting to crimp what had been one of the brightest patches of the labor market.
Tom Runiewicz, a U.S. industry economist at IHS Global Insight, forecasts that businesses providing support services to oil and gas companies could lose 40,000 jobs by the end of 2015, about 9% of the category’s total, if oil stays around $56 a barrel through the second quarter of next year. Equipment manufacturers could shed 5,000 to 6,000 jobs, or about 6% of total employment for such companies. Read the full story. (Subscription may be required).
