While job growth lifts most of U.S. economy, oil patch suffers

By Josh Boak, AP Economics Writer

The falling oil and gasoline prices that for months have coincided with strong U.S. hiring have helped most Americans.

A pair of tanker trucks parked next to pumps at an oil-producing well in McKenzie County, N.D. Lower fossil fuel prices have come at a painful cost: 122,300 lost jobs in the energy sector over the past year. Average wages have tumbled 1.5 percent to $26.72 an hour for energy production workers who kept their jobs, even as workers nationwide are earning slightly more money than a year ago. The November 2015 jobs report showed the sharp contrast between the overall economy and the ailing fossil fuels industry.(AP Photo/Charles Rex Arbogast, File)


WASHINGTON (AP) — The falling oil and gasoline prices that for months have coincided with strong U.S. hiring have helped most Americans.

But they've come at a painful cost for workers in the energy and mining sector: 122,300 lost jobs in the past year.

Even as workers nationwide are earning slightly more than they did a year ago, average wages have tumbled 1.5 percent to $26.72 an hour for energy production workers.

The November jobs report that the government released Friday illustrates the divide between the broad economy and the ailing fossil fuels industry: Overall, U.S. employers added a robust 211,000 jobs, and the unemployment rate held steady at a healthy 5 percent. But the energy industry, reeling from falling oil prices and weakening global demand, shed 11,300 jobs.

In just 18 months, oil prices have cratered from $107 a barrel to roughly $40. And gasoline prices have plunged from around $3.70 a gallon to $2.05. Those prices could be poised to fall further, with OPEC deciding Friday to keep production running high.

One measure of the damage: Even as the overall U.S. stock market rocketed up 2 percent on Friday, an index of oil and gas stocks tracked by the New York Stock Exchange fell 0.5 percent.

The industry's layoffs are expected to pile up as energy companies try to shore up their finances in light of the sharply lower prices.

"This is likely going to continue for six months or so as things settle out," said Ken Medlock, an economist and Senior director at Rice University's Center for Energy Studies in Houston.

Medlock said the rapid hiring that energy companies embarked on five years ago as fracking unlocked oil and natural gas from shale won't likely return soon. There will be less impetus to develop fields and increase production as long as prices stay low.

For most American consumers and companies, cheaper energy has been an unexpected gift. Drivers are paying less for gasoline. Jet fuel costs have plummeted for airlines and shipping firms. Heating oil expenses have dipped ahead of winter.

Average gas prices nationwide are likely to slide below $2 a gallon in the next several days, bringing them to their lowest level since March 2009, said Tom Kloza, global head of energy analysis at the Oil Price Information Service.

"There is going to be a lot more money for consumers to spend," Kloza said. "Whether they spend it and that leads to more jobs is an open question."

The outlook is rather different in oil country.

Since August, Texas' unemployment rate has risen as the state has shed oil and related manufacturing jobs, according to the Bureau of Labor Statistics. More than 17 percent of the mining jobs — which include oil and natural gas — have disappeared from North Dakota in the past year.

Other fossil fuels, including natural gas and coal, have also collapsed in price. The result is fewer mining jobs in coal-rich states such as West Virginia and Kentucky.

Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas, said he expects more industry bankruptcies and mergers, both of which will cost some employees their jobs.

Even if prices recover, Bullock said he doubts that the industry will quickly increase hiring. He expects companies to automate more work with robots and other machines.

"The industry will be more efficient; it won't need as many people as it did before," Bullock said.

The world's appetite for all fossil fuels has been eroded by anemic economic growth. China has slowed, Europe is stumbling and Japan has lapsed into recession.

Yet OPEC ended its meeting Friday with plans to keep the oil flowing. OPEC will maintain its current production levels of 31.5 million barrels a day, roughly a third of the global supply. By preserving market share for members such as Saudi Arabia, OPEC will continue to flood the market with more oil than people want, which then depresses prices.

In fact, OPEC members such as Iran plan to increase their production as a recent international agreement begins lifting its nuclear-related sanctions. Other member countries lobbied unsuccessfully to cut production in hope of boosting oil prices.

The impact of lower prices has ricocheted across the oil and natural gas fields of the United States. Major energy firms such as Schlumberger, Baker Hughes, Halliburton, ConocoPhillips, Chevron and BP have announced layoffs.

Average wages have largely declined for oil workers because of these departures. But Rice University's Medlock said he's heard anecdotally that some workers agreed to lower salaries in order to keep their jobs and protect their benefits.

The job cuts will eventually fade as companies become more financially stable through job cuts and mergers, not because of a surge in demand that would raise prices.

"There is such an inventory overhang that we have a lot of supplies to eat through before we see an increase in price," Medlock said.


AP Business Writer David Koenig contributed to this report from Dallas.

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