Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19
ADL Predictive Modeling Suggests A Big Move In Silver - 7th June 19
US China Trade War Will Start a Recession, or Worse… - 7th June 19
Land Rover Discovery Sport Brake Pads Expected Life, Worn Pads Dash Warning - 7th June 19
The Post Room Selfies Fun at Meadowhall Sheffield, From Game of Thrones to Desert Island... - 7th June 19
SAMSUNG - South Korean Electronics Giant - Investing in AI Stocks - Video - 7th June 19
Gold Price Rally or New Bull Market? - 7th June 19
Digging into the Rising Gold: Trade Tensions, Recessionary Worries and Dovish Fed - 7th June 19
The Risky Stocks Big Lie That Keeps Many Investors Poor - 7th June 19
Gold and HUI Short-term Strength Is a Strong Call to Action - 7th June 19
Fear Drives Stock Market Expectations - 7th June 19 - Chris_Vermeulen
Next British Prime Minister Tory Leadership Betting Markets - 6th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Oil Industry Faces Huge Worker Shortage

Commodities / Crude Oil Jul 13, 2016 - 11:53 AM GMT

By: OilPrice_Com

Commodities

The rig count has rebounded from the lows seen in late May, a small indication that oil companies in the U.S. could begin drilling anew. Shale drilling is a short-cycle prospect, requiring only a few weeks to drill and bring a well online. Because of this, the collective U.S. shale industry has been likened to the new "swing producer": low oil prices force quick cutbacks but higher prices trigger new supplies. In essence, shale could balance the market in the way OPEC used to.


While that notion was always a bit simplistic, one reason that U.S. shale production won't necessarily spring into action in short order is because the people and equipment that were sidelined over the past two years can't come back at a moment's notice.

Oilfield service companies have gutted their payrolls and warm or cold stacked rigs and equipment (temporarily or more permanently idling rigs). An estimated 350,000 workers have been laid off in the oil industry around the world, and the rig count in the U.S. is a tiny fraction of what it was two years ago.

Bringing back all of that equipment and personnel is no easy task. The Wall Street Journal, using data from IHS, estimates that roughly 70 percent of the fracking equipment across the shale industry has been idled. Also, about 60 percent of the field workers that are needed to frack shale wells have been handed pink slips. It is not as if those workers are sitting around waiting for the call to go back to work; many have moved on to other industries and won't come back.

"It's scary to think what a drag and what a headwind finding experienced labor is going to be this time around," Roe Patterson, CEO of Basic Energy Services, a Texas-based well completion company, told the WSJ. He also said that equipment suffers wear and tear over time even when not in use. "Pop the hood on your car and let it sit for a year. I guarantee the car won't be in the same condition."

Drillers could try to woo workers with higher salaries, and will probably be forced to. And after more than 70 companies that offer services to oil producers have gone bankrupt over the past year and a half, fewer are around to meet industry needs. A tighter supply of services will drive up rates.

And that cuts at the heart of what some analysts have been saying for a while about breakeven costs - if companies have to raise salaries to staff up and pay more for rigs and services, their costs rise. In other words, the cost "reductions" and "efficiency gains" that so many oil companies have boasted about over the past two years may have been temporary and even somewhat illusory. Costs could rise as drilling resumes - both wages and rig rates could see upward pressure as activity picks up.

Aside from laid off workers moving out of oil and into other sectors, Bloomberg notes that there is a separate demographic problem related to the last oil price downturn. When oil prices crashed in the 1980s, the same thing that his happening today occurred in the industry then: companies went out of business and workers were laid off. And because there were few job openings, very few young people between the mid-1980s and 2000 went into oil and gas. As a result, much of the workforce that stuck around is now aging and moving closer to retirement, setting up the industry for a labor crunch, or the "Great Crew Change," as some dub it. There are too few experienced professionals to replace retiring workers.

The American Petroleum Institute said in a report earlier this year that oil, gas, and petrochemical companies will need to hire roughly 30,000 new workers each year over the next two decades to replace retiring employees, with about half of those positions classified as skilled or semi-skilled blue collar positions.

The industry has been worried about this longer-term labor problem for years, but it could be the shorter-term issue of a scarcity of workers because of recent layoffs and idled equipment that delays a restart of drilling.

The expectation that shale drilling will resume once oil prices rise above breakeven prices for drillers has led to analysts to believe that oil production will begin to increase as soon as this year. But if drillers can't start drilling right away, even if they want to, because of labor and equipment bottlenecks, then the declines in production that the U.S. has posted for more than a year will surely continue for a little while longer.

Link to original article: http://oilprice.com/Energy/Energy-General/Oil-Industry-Faces-Huge-Worker-Shortage.html

By Nick Cunningham of Oilprice.com

© 2016 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules