Oil, gas jobs fall for first time in months
Oil and gas jobs in Houston fell for the first time in four months despite oil prices well above $100 a barrel.
The region shed 1,600 jobs in exploration and production and oil field services in May after three consecutive months of gains, according to an analysis of Labor Department data by the Texas Independent Producers and Royalty Owners Association, a trade group. The region still has 7,500 more oil and gas jobs than a year ago.
Statewide, the industry cut about 1,400 jobs in May, not adjusted for seasonal variations.
The reason for May’s decline is unclear, said the trade group’s president Ed Longanecker. It could just be a one month aberration, a statistical anomaly that might be revised later, or a symptom of the labor shortage making it difficult for oil companies to find workers.
Still, Longanecker said, his group expects oil and gas jobs to resume their upward trend. “We project continued employment growth for this sector in the coming months,” he said.
The Texas Independent Producers and Royalty Owners Association, known as TIPRO, represents oil and gas producers as well as royalty owners.,
Employment in the oil and gas sector is still recovering after sustaining deep losses during the pandemic, which all but shut down the global economy and cratered energy demand. Economists say it’s unlikely the industry will ever recover all the jobs lost in the pandemic, in large part because of advancing technology and automation that allows companies to produce more oil with fewer workers.
In Houston, for example, overall employment has surpassed its pre-pandemic peak, but the region still has 12,000 fewer oil and gas jobs than it had in February 2020, according to the Labor Department.
Oil prices were rising quickly
forces driving oil prices higher, analaysts said. They will do little to persuade OPEC to significantly increase production, end the Russian war, or expand refining capacity.
“What I don’t see is a change in the overall direction of the market, which still points to higher prices until something breaks,” said Ole Hanson, the head of commodity strategy at Danish investment firm Saxo Bank.
Oil prices were rising steadily as post-pandemic demand outstripped supply, then the Russia’s invasion of Ukraine sent them into the stratosphere. Russia is one of world’s three biggest oil producers, along with the United States and Saudi Arabia.
Reaction to the war, in form of sanctions and boycotts, is keeping Russian oil from global markets.
President Joe Biden and Energy Secretary Jennifer Granholm have taken a kitchen sink approach to try to lower prices. Biden is tapping the nation’s Strategic Petroleum Reserve and pressing OPEC to open the taps.
Pressure on refiners
Granholm this week is planning to put pressure on refiners, calling on them to examine what steps they can take “to increase refining capacity and output and reduce gas prices in the near-term,” an Energy Department spokesperson said last week.
U.S. refining capacity is a bit lower than it was before the pandemic, but refineries are running pretty close to full-tilt, at about 94 percent of capacity, the Energy Department reported last week.
Gasoline prices, while shocking motorists everywhere, still vary significantly across the country. In the South, which has a dense network of refineries and pipelines, gasoline is retailing round $4.50 per gallon. In the Midwest, where energy infrastructure is not as robust, gas prices are averaging around $5 per gallon.
“This is a problem of logistics,” and not necessarily refineries, said Reid I’Anson, a senior commodities economist at energy data firm Kpler.
Policy limits
Biden is facing a similar problem as the Fed. Those logistical issues are not something the administration can resolve with meetings. Nor is the war in Ukraine, which NATO said could last for years. That may leave it to the economy. Bob McNally, president of the Washington consulting firm Rapidan Energy Group, oil price booms typically end in recession, which ultimately destroys demand and lowers prices. Energy prices and the economy may be approaching that breaking point, he said.
“We’re closer to a price peak than the consensus expects because the consumer is going to capitulate to this relentless, brutal price and macro pressure,” McNally added.
Fed Chair Jerome Powell testifies before Congress this week, which could influence oil markets. With refineries under the microscope, the weekly release of data on petroleum supply and demand may garner extra attention this week. The final reading of U.S. consumer sentiment for June is out on Friday.