As oil prices rise and demand recovers, the U.S. oil industry is raising drilling and completion activity and has started to re-hire workers it had dismissed at the peak of last year’s crisis. But not all former employees want to return to the sector—some have quit oil for good and don’t want to look back at an industry notorious for its cyclical ups and downs.
Despite the recent uptick in oil industry employment, short-term and permanent shifts in workers’ negative perceptions of the sector have already started to create labor shortages.
These shortages threaten to delay and even hinder the recovery of U.S. oil production, analysts say.
The EIA currently estimates that American crude oil production is set to jump to an average of 11.8 million barrels per day (bpd) in 2022, up from 11.1 million bpd in 2021.
Not All Jobs Lost Will Return
Job losses in the sector have stopped after exploration and production companies and oilfield services providers let go around 100,000 employees in 2020. Around a third of the jobs lost are now back, but not many of the remaining jobs lost last year could be back in the industry soon.
The U.S. energy technology and services sector added jobs for a fifth consecutive month in July, an estimated 6,082 jobs, the Energy Workforce & Technology Council said in an analysis based on preliminary data from the Bureau of Labor Statistics (BLS). The council estimates a peak of more than 115,000 pandemic-related job losses. Since then, the sector has restored around 38,300 positions, bringing total pandemic employment losses to 76,800 jobs and $8.7 billion in annualized lost wages.
Some of the job losses from 2020 will be permanent. Oilfield services providers have digitalized some operations with remote controls, while oil majors reduced thousands of office-based jobs as they streamlined operations and cut overhead costs to cope with one of the sector’s worst downturns in recent years, and a second such crisis since 2015-2016.
Other jobs could be in flux and will depend on commodity prices, and—to an extent—on oil production policy decisions taken in Riyadh, Moscow, or Vienna.
More and more workers are fed up with the boom-and-bust nature of the oil industry after two major oil price and drilling activity collapses in just five years. They vow they would never return to depend on the volatile oil markets and quitted the sector after having been let go in 2020.
The lack of job security and the growing shift toward renewable energy, including with active support from the current U.S. Administration, are discouraging some former oil workers from returning to the industry.
In addition, salaries for oilfield maintenance workers are still around 10 percent below pre-pandemic levels, according to data from energy analytics firm Enverus cited by Bloomberg. The lower wages additionally discourage workers from going back to the oilfields.
There aren’t enough positions for all workers who lost their jobs last year. Yet, labor shortages have started to emerge this year, jeopardizing the expected recovery of U.S. oil production growth next year.
“If reported labor shortages continue, it would be impossible to grow production,” Elisabeth Murphy, an analyst at research firm ESAI Energy, told Bloomberg.
North Dakota, for example, is struggling to grow its oil production, even as crude prices are at $70 a barrel. The fewer willing workers are heading to Texas and New Mexico to work in the Permian rather than in the Bakken shale field.
North Dakota had just eight frack crews operating in the state at the end of July, while it would typically expect 20 to 25 crews working in the Bakken at these price levels, Lynn Helms, Director at North Dakota Department of Mineral Resources, said, as carried by Grand Forks Herald.
“They are trying with all their might to hire,” Helms said, referring to companies operating in North Dakota.
“But they are not finding employees that want to come back into the industry and come back to North Dakota to work on the frack crews,” he added.
North Dakota drillers may have to offer higher wages and other incentives to attract oil workers away from Texas and New Mexico, according to Helms.
Oil Industry Talent Crunch Is Coming
Despite the focus on renewables and clean energy jobs of the Biden Administration, jobs in oil and gas still pay more than jobs in the solar, wind, energy efficiency, and energy storage industries.
However, the next generation of employees, Millennials and Gen Zs, are not too keen to work in an industry they view as dirty, difficult, and dangerous. While salary is often the biggest draw for working in the oil industry, many young people would choose other industries with similar pay because of their perception that oil and gas is an industry of the past and one that does not represent their values. Technology, AI, and data jobs in oil could be a winning sales pitch with young people, but the sector competes with the tech giants for IT talent.
The oil industry will either have to pay even higher salaries or start to pay attention to the trends in the energy transition and ESG in order to attract and retain talent. Or both.