The U.S. oil industry was already in a state of flux at the beginning of the year thanks to the spread of the novel coronavirus, but things came to a head earlier this week when the price of U.S. crude went to sub-zero levels.
Though prices have recovered to some extent, WTI continues to trade at just under $18 per barrel. The bad news is that thousands of high-paying jobs are staring down the barrel if weak oil prices continue to prevail.
BW Research Partnership reports that the oil and gas industry laid-off 51,000 workers in March in the drilling and refining sectors. The number swells by 15,000 when jobs in the oil equipment, shipping, and construction businesses are included.
BW Research arrived at these numbers after going through survey data from 30,000 energy companies and statistics from the Department of Labor. The research firm believes this may just be the beginning of job losses in the oil and gas industry as April numbers aren’t looking too good.
The firm says the industry could lose 30% od its jobs in the first quarter. The last oil price downturn cost the industry nearly 200,000 jobs , wiping out a third of its entire workforce in 2016. At that time, the price of a barrel of oil was down to $26–a 13-year low.
At the time, Goldman Sachs estimated that the average pay of an oil and gas worker was 84% higher than the national average. So, oil companies had no option but to resort to layoffs as prices plunged.
According to Rystad Energy, there are only five shale oil companies in the U.S. that can drill profitably at a WTI price of $31 a barrel. This means that none of the companies are currently profitable as WTI lingers below $20 a barrel. The bad news is that the Energy Information Administration forecasts an average WTI price of $29.34 per barrel this year.
In this environment, layoffs could continue despite President Trump’s assurances. According to the 2019 U.S. Energy and Employment Report, the industry directly employed 1.5 million workers as of November .
As it turns out, energy employees enjoy the highest median salary as compared to any industry in the S&P 500. While the American median wage was just over $77,000, the median pay of the energy and utility industry was $117,000. The median salary of an employee at refining firm Phillips 66 was close to $200,000 at that time.
With demand taking a hit on account of the COVID-19 spread, these high-paying jobs are at a considerable risk unless oil dramatically gets out of its current rut.