The result of the oil and natural gas surge has meant cheaper prices at the pump for most Americans, but according to Forbes Magazine’s Chris Helman, today’s lowered prices have resulted in unprecedented losses for Texas’ oil and gas workforce.
“This is a lot deeper, it’s been so quick,” Helman says. “It was just last June that the price of oil was over $100, and today as I speak to you we’re looking at $43, and that’s incredible.”
Helman says that as a result of the boom in the oil economy and its resultant decline, a lot of Texas’ workforce has been laid off.
“I think in Texas we’re look at about 30,000 lay-offs right now,” Helman says. “It’s hard to pin down the numbers, but I have this spreadsheet that some colleagues and I have been building and trying to figure out layoffs from all these different companies and so far we’ve tallied up about exactly 75,000 layoffs.”
Since Texas is the largest oil producer in the country, Helman says that the majority of those layoffs have disproportionately hurt the state. In an industry of about 600,000 workers nationwide, the 75,000 layoffs have effected more ten percent of the oil and gas workforce.
Each derrick – or “rig,” in industry terminology – employs around 40 workers for its drilling and maintenance. Helman says that that amounts to big losses for the U.S. economy.
“The rig count has come down about 700 rigs in the past year,” Helman says. “So that’s 30,000 people right there. It’s a tremendous amount of pain that this industry has gone through, and my concern is that the worst is not even over.”
Despite that squeeze on the industry, Helman says that it may yet take some time for Texans to start to see the ripple effects of the contraction to show up.
“If I’m a big rancher in West Texas and I’ve allowed some oil company to drill my land, I usually don’t get my royalty check until about two months after they’ve produced this oil,” Helman says. “So there’s a lag effect, it’s going to be a couple months before I really think ‘oh man, how am I going to make my house bigger and how am I going to make my car payment.'”
Helman says that there may be a silver lining for Texas oil producers if they are able to hang on to their rigs.
“Prices will have to go back up, at least to meet the marginal cost of production, which world-wide averages closer to $75 per production versus the $43 per production that we have now.”