Boom times come back to the oil patch
Wages soar for workers in US fracking industry, writes Myles Mccormick
At the Burger King outlet in central Hobbs, New Mexico, a new sign has been plastered across the front window: “NOW HIRING: COOKS/ CASHIERS APPLY WITHIN!” Similar notices proliferate across the city’s main shopping plaza: Pizza Hut, Little Caesars, T-mobile, CVS, K-mart, Quickcuts and Neighbourhood Barbershop are all advertising vacancies.
A boom is under way in this dusty, sun-bleached desert town: joblessness is plunging, wages are soaring and new tax receipts are flowing to state coffers. Driving it all is a surge in crude oil production from the Permian Basin, a vast hydrocarbon trove that stretches across western Texas and southeastern New Mexico.
While other United States oilfields are in decline, Permian production hit a record high last year as Russia’s invasion of Ukraine helped drive energy prices higher. At 5.6 million barrels a day, the field now accounts for almost half of all the oil produced in the US, pumping more than many Opec countries. The state of New Mexico’s crude production last year eclipsed output from the entire country of Mexico.
Unemployment in the US oil and gas industry slid from around 6 per cent a year ago to less than 2 per cent in December — the lowest in a decade, according to the Bureau of Labour Statistics. That stands in stark contrast to sectors of the economy buffeted by rising interest rates: tech companies have laid off almost 230,000 employees since the beginning of 2022, according to layoffs.fyi, which aggregates job cuts.
Some 2400km from Silicon Valley, the bustle in the Permian is palpable. Oil and gas producers deployed 350 drilling rigs in the region last week, up by about a fifth from the same time last year, according to data collected by Baker Hughes. Other jobs have followed, from truck drivers and mechanics to hotel cleaners and construction workers.
“Business is booming,” said Bruce, a 19-year old employee at a Hobbs supermarket as he retrieved trolleys scattered about the plaza car park by the nightly influx of oilfield workers. “Work is at an all-time high . . . everybody’s looking for somebody.”
Outside Hobbs, oilfield traffic weaves down winding county roads with names such as Battle Axe and Oiler. Trucks laden with sand and gravel speed down highways, utes haul trailers carrying shining new diggers; 4WDS cart diesel engines and coils of piping.
Their passengers are suddenly earning big money. Roughnecks in New Mexico can command rates of more than US$27 ($41.90) an hour, according to consultants Rystad Energy, up from US$18-U$S20 a year ago. A commercial trucking licence alone is enough to bag a driver a salary of over US$100,000 without so much as a high school diploma.
“Most of the entry-level jobs right now are anywhere from US$15-US$20 an hour — and usually more towards the high end,” says Sam Cobb, Mayor of Hobbs. “It is an excellent opportunity for people that are not from [privileged backgrounds]. Unless you’re an engineer, you don’t have to go to college to become an entry-level worker in the oil and gas industry.”
Surging production has increased tax receipts for New Mexico, historically a state with one of the highest poverty rates in the nation. The state budget has jumped from less than US$6 billion four years ago to almost US$9.5B this year, with boosts envisaged for education, housing, healthcare and infrastructure spending.
“It’s been just spectacular,” says Cathrynn Brown, a Republican lawmaker in the New Mexico state House of Representatives. “It’s a boom for sure — but this is bigger . . . than anything we have seen before. It’s unprecedented.”
Hobbs has known booms — and busts — before. In the 1980s, when oil prices crashed to historic lows, cars in town bore bumper stickers that read, “Can the last person to leave turn the lights out?” The start of the pandemic in 2020 effectively halted oilfield activity as prices again collapsed, clobbering workers.
Now the mood is different as experts forecast record global oil demand this year and crude prices stabilise around US$80 a barrel.
Plum salaries in the oilfields have drawn workers from traditional service jobs like retail and hospitality, leaving restaurants running at half capacity owing to a lack of staff. Others have jacked up wages in a bid to compete: Burger King is offering up to US$28 an hour to flip burgers, a job that pays an average of US$19 in highcost New York.
Hotel rates are climbing, with rooms increasingly booked out in the middle of the week to accommodate visiting workers.
The current upcycle comes despite fears that the shale revolution that made the US the world’s biggest oil and gas supplier is drawing to a close. Wall Street is demanding that profits be returned to shareholders rather than splurged on drilling binges. And in many parts of the country, the best acreage has already been drilled.
Oil producers now complain about rampant cost inflation, another reason the US shale sector is on the whole struggling to increase oil supply as fast and easily as in the past. On top of this, the push to wean the world’s biggest economy off oil and gas in favour of cleaner alternatives is gaining pace.
But in the Permian, there is confidence that America will continue to guzzle the hydrocarbons it produces for a long time to come.
“We look at the whole energy mix dilemma from a different lens since we are in the business here,” says John Yates, chief executive of Abo Empire, a local producer. “The Permian Basin is more than 100 years old but that doesn’t render us to the pile of dinosaur bones.”