Oil prices and job cuts

[SnowBells]

Massive job cuts have been announced within the oil industry due to the continuing decrease in the price of oil. I've been wondering what people do who have worked on oil rigs, etc. for years when this happens?

In the US, older people have said they've been through boom and bust years several times before, and they have learned to save during the boom years. But surely, not everyone does? And it is a very specific skill that's not very transferable??

My DP isn't a rig worker, but he is in the oil industry. It is, to be quite honest, scary as fuck. There were redundancies at his place last year and I was a wreck while it all played out. He has a job for now. Next month or next year, who knows?

DP is better off than some, his position is scientific and thus some of the skills should be transferable if it comes to it. We just have to make it work - we don't have the savings, DP is early career, not high paid and I am looking for work.

Naoko

My DH is also in the industry and he could possibly move into software or finance (he's in the mathematics side of oil). I feel pity for those who have a very oil-specific background though. Rig workers have good wages but very specific skills that are not as valued elsewhere...

Snowbells ... as you say, we have seen commodity booms and bust cycles before, and often governments can help alleviate the pressures by reductions in tax, from a a heavily taxed industry e.g. isn't 70% of what we pay at the petrol pumps tax, built up over many years, and one of the highest in Europe.

I'll find it ironic if having listened to a SNP energy spokesman on the Daily Politics ranting on what Westminster has to do, then gets what he wants, his party will be ranting again by April Osborn hasn't his his Deficit reductions targets, no doubt currently not planning an oil tax give back.

A major government problem can be taxing company 'windfalls' and surpluses in those good times, but forgetting to reverse them in the bad - but I'd be surprised if oil didn't get decent Westminster help soon.

One other thing I did hear recently, is the the oil support industry having banked money in the good times tends to have a cushion to negotiate lower service prices with the oil giants in the bad, to negate the need for mass redundencies, so fingers crossed that reserves and govy help, adds certainty to the industry.

Many oil producers at war with the U.S. Fracking industry e.g. Saudi Arabia, trying to force them out of business and stop them ruining their cartel can not last too much longer as their (OPEC, Russia and others) collective oil production costs probably range from $60 to $100, so they are hurting.

Quite when we will revisit over $60 to $100 again no one knows, but hopefully will level off (possibly for years) at levels that still encourages both production and exploration.

Isitmebut

Yes, the oil support companies have built "cushions", but those are not there to spare employees. Those are only in place to make shareholders happy. That's the problem with CEOs in the industry. They only answer to shareholders, they don't care much about the regular employees who really are the ones who pay his (for they are mostly guys) salary.

In the last few days, oil support companies have announced combined job cuts in at least the five digits globally. That's huge and it's only the beginning...

SnowBells .... after your last post, I thought I'd have a look to find what oil price level could/would have caused the UK oil companies pant pooping and shedding of staff/investment you describe, and I thought that you might find this article about an informed report, back in December;

“Oil price crash means £55bn of projects face axe”

“32 developments and 5bn barrels affected with North Sea oil plans in doubt”
www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11292496/Oil-price-crash-means-55bn-of-projects-face-axe.html

” Global energy consultancy Wood Mackenzie has said that 32 potential European oil field developments containing 4.9bn barrels of oil equivalent are waiting for approval on more than $87bn (£55bn) of funding. These could be at risk should oil prices fall below $60 per barrel."

All markets prices overshoot on the way up, and down, and oil IMO could easy consolidate on a price range of $50 to $60, testing that top price, breaking the lower price from time to time.

MY POINT for what it is worth being for those working within the industry, is that the current cuts could easily be the main cuts for now, pending the next phase of oil market activity looking to establish a fundamental/technical price bottom - so many moons ago having worked within a 'hire & fire' type industry, if a current oil related job survivor, I would feel a bit safer if I saw oil between $50-60 - especially if the oil industry gets UK government help.

I know what it is like in such 'tin hat' employment times, you don't know whether to wear it, or sit on it, so best of British luck to all the employees and their families relying on good market/government news.

There aren't many industries where jobs are for life. Unless you're independently wealthy or possess some unique talent that is in high demand, you've got to assume that at some point you'll be looking for a new job. Oil work has been pretty steady up to now with attractive salaries to compensate for often harsh conditions. Nothing is for ever

Cogito

Of course, there's no job for life, but with many office jobs, skills are very, very transferable. But I can't see what a rig worker can do outside of oil that would actually be similar and pay a remotely similar wage.

Snowbells there are many jobs that have the same skills for oil rig workers, that they don't pay the same is due to level of risk.

Because of the pay the workers will have to do what everyone else does as tighten their belts accordingly.

Dh is also in oil industry but more involved in rig maintenance so his job which is onshore is safe for now (though they have got rid of all their contractors)
I think govt has to step in, they were quick to take 'windfall tax' in 2012 when prices were high and this put many projects on the back burner at that time. They need to act now, not wait till budget or more jobs will be lost with ripples felt across areas such as Aberdeen where oil is main employer

Why "act now" so close to a Budget; surely the oil industry big boys and support industry currently just needs a nod something will be there to wait and see?

I heard the SNP's rant the other day on the Daily Politics comparing the UK oil industry and the challenges of our economy with Norways ... how disingenuous/misleading was that.

If the government had to do something right now rather than wait until April, I'd suggest they help the Milk Farmers, as oil security is one thing, yet food security is a major UK problem and fell under the last government, so I'd be well miffed if fell under this one as well e.g having lost so many milk producers, we had to import it from abroad.

I luv markets, and when I used to follow gold when the price was falling from over $1,900 and when read that the average cost of production was around $1.100 an ounce, I knew that would be key, as with supply and demand, once the threat of mining supply closures become a reality, the price first stabilises and then finds both a fundamental and technical (chart price) support level.

What is that to do with the price of eggs and oil you might ask, well I found a comment today that suggests my view of $50 to $60 a barrel oil near term trading range, has some fundamental supply view to underpin it, as discussed today by the oil legend Mr T. Boone Pickens.

Remember it is those frackers in America, nearly supplying as much oil per day as Saudi Arabia, that has caused this collapse in the oil price, and if an average price of $45 a barrel CLOSES off American supply, a $50 a barrel price floor isn’t far away.
”US oil producers can’t keep drilling at $45 oil:Pickens”
www.cnbc.com/id/102364314

Whether oil rises to over $70 by year end as Pickens suggests, who knows what is in the future, an arab ruler could die here, an Ayatollah could croak there, anything can happen to markets in a week never mind longer, but knowing $45-50 is an oil price production floor and $60 was the UK oil company trigger for scaling down investment – there is a much better hope for our oil industry based on supply fundamentals, than the recent freefall suggested. IMO.

(Dipping into murky waters again over here)... There are no jobs for life anywhere, the evidence is that professional jobs of all kinds are on the wane and low-paid and uncertain jobs are becoming the norm. Workfare is causing something of a threat to minimum wage. Technology is replacing jobs and will replace more in the future, I've seen suggestions that robots could replace surgeons and software reduce the number of teachers. Under these conditions why pick on oil riggers specifically, all jobs are under threat.

I liked this piece about how we're going to have to change our whole approach to work. It's a start. notesbrokensociety.wordpress.com/2014/09/07/hard-work-why-we-need-to-change-the-way-we-think-about-work-pay-and-benefits/

“All jobs are under threat” or jobs ‘evolve’, requiring our children receive a more relevant education for global economies now needing more semi skilled and skilled workforce?

We have around 700,000 unfilled vacancies in the UK at the moment, how many are due to our indigenous population not having the right basic and enhanced skills? We will need about 70,000 Engineers, yet have a small army of young adults sporting Media Studies, Sociology and other ‘ologies, that are getting them where exactly?

Improving the key English Maths and Science skills at school is a start, as is the current learning at school of computer coding.

But if we as a society want to improve the career prospects of our young, ensure that they are paid way above the current minimum wage and their tax receipts can ensure that those ON the Minimum Wage get better than a Living Wage.

However it has to be through policy POSITIVITY, not spend whole administrations trying to restrict the private sector through regulation/red tape - and thinking of new ways to increase the taxes on society.

Regarding OIL/ENERGY and the evolution of jobs in that industry, it would appear that it is not just the SNP still planning for their independence revolution that is against Fracking, currently (from Fracking in the U.S.) more than halving the price of oil per barrel when they were making their plans how to spend that money.

“Government faces fracking setback as MPs call for total ban”

www.independent.co.uk/news/uk/politics/governmentfaces-fracking-setback-as-mps-call-for-total-ban-10001779.html

“The Government is today facing a backbench rebellion over legislation to make it easier for energy companies to frack for shale gas, as an influential committee of MPs demands a total fracking ban.”

”A number of Conservatives and Liberal Democrats are preparing to defy a three-line whip and vote in favour of amendments to the Government’s Infrastructure Bill that would effectively impose a moratorium on fracking in the UK.”

The SNP Sturgeon again made the point at the weekend that the UK is no Norway, who put oil wealth away for future generations, but then again, I’m guessing that unlike the UK in 1976 when North Sea oil production to our shores began, Norway didn’t call in the International Monetary Fund (IMF) to dig us out of aa uncompetitive economy & financial crisis, thus landing the land with a repayment plan.

It is no secret we are running out of North Sea Oil, it is no secret we need more jobs, and it is everyone’s wish to pay down our seemingly perpetual UK National Debt and maybe join Ms Sturgeon’s objective to have an energy funded Future Generation Fund. Or is that just for Scotland? lol

Norway didn't/doesn't have a post industrial economy to contend with.

Ms Sturgeon is definitely just for Scotland!

Sociology, philosophy, histor, all these things teach obe how to think, how to question, and provide alternative visions of how things could be. No surprise to me that our culture right now is so hostile to all of them. I remember reading once that Islamic cultures had huge numbers of people studying science and none in arts and humanities - for this very reason. Our culture doesn't want it's ideology questioned any more than ruthlessly repressive organised religion does.

And yes, there are 700 000 job vacancies right now. More than twice that number unemployed by the government's measure and another pool of 7 million or so (its on ons, go look it up if you want) of those considered ' economically inactive', students, housewifes and the like, who coukd yet take some of those jobs. Plus god knows how many who are simply slipping off the system as benefit sanctions become more severe and irrational.

You are right that jobs are evolving: its the only thing you're right on. They're evolving to be insecure, low-paid, and with few rights attached. Go read that link on how the minimum wage is under threat as a veritable slave army is being created by benefit sanctions (again).

And then have another look at how many jobs are being replaced by technology now. When did you last see a human at the bank for paying in money? Did you use a self-service checkout recently? Soon it'll be taking over middle class positions, like I said surgeons, teachers, translators will be next.

These jobs are not being replaced. If it only takes 1 person to program, eg 10 computers a year, and 10 people to build 1000 of the a year, but 1 computer takes 1 human job, then what? I'm making those figures up as an example, but the principle holds. We won't need so many jobs in the future. Thenwhat are we humans all going to do? Time we started facing facts and thinkng about that right now.

Before I answer this jobs crisis threat in detail, I will ask you 4 questions to be getting on with;

• Who are we looking to employ within the UK, just UK citizens, or the rest of the world?

• On a 'chicken or egg' theological type question, what comes first, the job or the pay rate?

• What will it take to bring back to the UK, jobs lost to the likes of China over the past 20-odd years?

• Which country's economy that has followed the Luddites, workers rights that scare employers shitless, or protectionism, 7-years after the crash, is currently thriving?

Ok I'll bite. Go ahead and slaughter me.

'who are we looking to employ' - well in the uk I'd guess primarily uk citizens, that being the primary constituent of uk population. I don't see any need to blame immigrants for all of the uk's problems though, we can make those up all by ourselves (if that's what you're getting at)

• job or pay. Aha, the lovely dichotomy that employers and an employers market has been using for the last 30+ yrs to justify all the uncertainty, insecurity and real-wage cuts. I don't see that there should be a dichotomy, or that there needs to be. If I absolutely had to choose under those circumstances, I'd probably say we need more high quality high. pay jobs to address the balance. The tax revenue people might agree with me.

• blame China now? I don't think you can 'bring those jobs back' simplistically under conditions we would accept. They've gone there, principally for manufacturing plastic tat, because of low costs, especially pay, because of low workers rights. This is globalism - a race to the bottom. Global capitalism is not working for the environment, nor for workers for precisely that reason, and I don't believe gives us any long term answers. We need a return to more localised, self-sufficient economics.

• the last I presume is some kind of trick question. I wouldn't say the british economy is thriving at the moment either, if that's your poiint. Not from the pov of those on the bottom, not from the pov of tax revenue, not from the pov of current account deficit. The only pov its working from in fact seems to be that of rich shareholders and rich politicians. I think there will be another crash soon and this will become obvious.

ps Those jobs aren't working all that well for the ordinary people of China (or wherever) either. Low pay, low immediate rights, h+ s risks, environmental damage. These things benefit no one. We need a better system.

LighteningOnlyStrikesOnce ….. well done for ‘biting’, FYI I have absolutely no interest in ‘slaughtering you’, I was just trying to work out your level of ideology vs the real world and your general optimism – as far too many people with similar views tend to be ‘angry’ people, IMO, thinking small as if they are looking down the wrong end of a joined-up-policy telescope.

Let me answer this in various parts please, government and our responsibility, versus the right to some secrure

On education mentioned on your previous post, let us assume for now, on this jobs/pay debate, that every child released to the economy after around a decade or so of full-time education is not only a ‘thinker’, but a ‘doer’, with all the basic skills they need in a mature UK semi/skilled economy, including foreign languages to live the EU free movement/jobs dream – rather than not, with many educated to a UK Minimum Wage default option

In the real world, to many Employers looking to locate, relocate or expand, a semi and skilled workforce is pre requisite to a country and region.

So a society that feels every child should be as clever (or dumb) as each other, will not attract those higher paid, higher potential tax receipt jobs. A country with a mature economy cannot do their bit for the low paid and bring them OUT of income tax, if most of our economy is not moving up the ‘value chain’, from those producing ‘widgets’, in far flung places, planning to ‘evolve’ up that value chain and take our current jobs.

On immigration they are last people I blame for wanting to better themselves and seeing the job opportunities within the UK, but one has to wonder why within a government policy of EU and non EU multiculturalism, why in 2004 we had over 500,000 unemployed 16-24 year old ‘thinkers’, over 700,000 ‘thinkers’ pre financial crash (and tending higher) seemingly unable to compete in the UK, or in most cases not possess language skills to get jobs outside the UK?

In addition to that, if in job percentage terms for over a decade we have a government/private sector growing FASTER than the business/private sector, how with such an unbalanced economy, with ever more regulation and red tape, is that ever going to end, how can governments offer apprentice positions via companies/jobs that don’t exist?

So are you starting to see using our joined-up-policy telescope, our education system, the problems of an infinite number of employees, a finite number of pre and post great recession jobs - wage levels would naturally be compressed, and that government both has SOME responsibility for that AND levers to improve society, not just their wages.

Contd.

Now may we look at Businesses here and in the real world, as there should be a better understanding of what we currently have, what is could be, and hope for our future.

In regards to UK jobs, their security and pay rates, while I fully understand in any country that long term unemployed (and others) can ‘slip off’ the statistics, but in regards to “the economically inactive”, being so for all sorts of reasons including those caring full time for grown up relatives, is this new?

I ask this as I thought I remembered there being 8 million under the last government, but politics and accuracy aside, the point here is, and please correct me if I’m wrong, this is a long term situation, not a off statistic unemployment list where citizens are guaranteed to seek employment – and that the likelihood of any government holding several million jobs open ‘just in case’, is unlikely. I believe what is more important, is that we have a flexible enough economy to absorb whatever chucked at it.

Next, when looking back to 2007/8 on, do you fully accept that recessions are called that for a reason; I can not find a recession in history where as a result, in the immediate aftermath most companies are doing better than previously, jobs were secure and salaries IMPROVE – what is called the recovery comes later, and how much later, depends on both the severity of the recession and the positive, or negative, policies of a government to help businesses.

To emphasis the role of government in creating the environment for secure job creation, let us next look at a few countries with what you might call the ‘secure employment’ I’d guess that you aspire to; Italy & France, both similar sized economies to the UK, but neither of them have reformed their labour markets as we did decades ago, and even now KNOWING they have do, are being dragged kicking and screaming to abandon their ‘secure jobs and pay’ policies.

In Italy, to our ONE recession since 2008, I believe they have had THREE, due to ongoing lack on investment and jobs in the private sector, they are only just getting around to legislating that companies (usually struggling to survive in recessions) can fire workers for BUSINESS REASONS, without being sued.
uk.reuters.com/article/2014/12/24/uk-italy-economy-reform-idUKKBN0K215720141224

In France, a country with a similar country economic model to the 2010 UK, ideologically agrees with you on ‘secure, well paid jobs’, but if you can look at the graph comparisons with the German model we now more closely follow, France not only has around 11% record unemployment while Germany’s fell - but they have had MORE BUSINESSES GOING TO THE WALL, and failed businesses, or those frighten to employ due to labour laws, will not offer new jobs at any RATE.
www.wsj.com/articles/french-attempt-at-german-style-labor-reform-flounders-1417684679

Governments therefore can greatly influence (positively or negatively) Employers abilities to offer jobs, never mind higher pay rates, as businesses, especially larger ones, need to plan several years ahead and need to have confidence in governments not to dramatically change their COSTS OF DOING BUSINESS, when they have enough to worry about competing within their industry.

Here is a list of business worries I can think off, many could affect a large, medium and small businesses FIXED COSTS at any time e.g. an anti business Chancellors Budget, or succession of them;

Higher Corporation Tax.
Higher Business Rates (local).
Higher Income Tax compensation (via salary) for senior staff, using international remuneration scales.
Higher regulatory/red tape costs.
Higher National Insurance costs.
Higher raw material costs.
Higher Fuel Escalator costs,
Higher costs of government controls.
Higher Interest Rate/Borrowing Costs as they ‘normalize’.

Cont’d

The Minimum Wage (which will be a fixed business cost) is set by a non government commission with representation from a broad perspective (including trade unions I believe) who look at economic & market conditions when setting the rate. Now I have no idea if should be a one-rate fits all, but we did not have tens of thousand high street shops close, or have half our manufacturing decimated over 13-years, because they were all able to pay higher wages.

You mention ‘the good old days’, I remember them well as manufacturing dropped through the 1970’s from around 29% of our economy to around 22%; near 20% inflation and interest rates, a wages/prices/inflation spiral, penal tax rates to all including a 50% Corporation Tax should a British company dare make a profit – strikes, big pay rises, right up to the time British companies closed their factory doors.

Germany & Japan had none of those economic or labour problems, and in addition, I believe the ability of German and Japanese workers to understand the problems their companies - had is why we buy premium manufactured goods from them now and only buy a British product back then, if they build it. But that would not happen now, unless everyone thinks, as you think, better to have no job than what workers consider low pay.

Now back to China & India etc, there is a reason to be optimistic here, as have you heard the term ‘reshoring’, which in a nutshell is the possibility of jobs previously here and lost to low paid/emerging countries, coming back.

You mention low pay in China, and you’d be right, up to a few decades ago wages 1/7th ours and low benefits/government costs, but for years, China then saw wages in semi skilled etc jobs rise 10-20% a year.

China and others are not just making low cost ‘widgets’, their abundance of engineers etc means that they are ALREADY looking to eat our mature economy higher up the value chain, lunch. When Obama asked Steve Jobs why Apple won’t reshore everything back to America, his answer if memory serves was simple, America didn’t even have the numbers of high skilled workers to even make it possible.

I go back to my earlier point on UK education, where if we want to get as many off low pay rates as we can, the UK cannot expect businesses to offer medium to high skilled jobs to UK workers they know do not currently have the skills,

The main point is they can come back for logistical/transport reasons, and while our pay rates will still be higher, as long of the cost of fat, inefficient, red tape smothering government keeps their other COSTS OF DOING BUSINESS LOW, the UK, when compared to the labour train crashes in the likes of Italy and France.

Aspiring to be as lost as France by looking through the wrong end of an economic telescope, is no blueprint to a prosperous future UK, whether looking for higher paid jobs, or having the economy/money to help those that need it. IMO.

Oil prices started to drop in part because of decreased demand and partly because of increased US production. But the Saudis have very clearly flagged that they won't cut production and have in fact increased it, because they are playing the long game. They have low production costs and can afford to take a hit on profits for a while if it means taking out some of their competition and advance their geopolitical interests through control of energy supplies.

So yes, it's operating as a normal market in a way - currently as a price war between the Saudis and the US - but the impacts are so huge because it doesn't usually operate as a normal market, and once the Russians/Americans/Venezuelans have been dealt with and future investment postponed/cancelled, the Saudis (and the rest of OPEC) will be in a much stronger position to profit in the long term.

If I'm reading this right, isitmebut, you are, in a very long winded way, agreeing that there are fewer jobs around now, let alone in the future.

Your approach then is to say simply that we have to accept that, accept the status quo, accept the social and environmental problems globalism is causing and merely race to the bottom harder. In effect, you're not offering any real solutions to the problems.

Incidentally on the education front, apart from the known language problems I'm not convinced we have a skills shortage in the uk, certainly not when compared to china: the uk education system isn't that bad. It's a tired old excuse. Off shoring was nothing to do with skills and everything to do with cutting costs. Onshoring is occurring because the lack of skills and cultural knowledge relevant to our needs here (eg our language) is finally becoming obvious. And thinking without doing is at least a start: doing without thinking leads to the kind of catastrophic mess that is modern capitalism.

I think we need a completely new approach, which will probably involve a return to more localised self-sufficient economies. We are both looking from different ends of the telescope. I prefer to examine the needs of the originators of economic behaviour, people, over the needs of a system which cannot exist independently of us.

"If I'm reading this right, isitmebut, you are, in a very long winded way, agreeing that there are fewer jobs around now, let alone in the future."

Errrr, nope the opposite, try reading it again, remembering that we have a record number EMPLOYED today, than when we found 2-3 million new jobs in the 2000's, needing an outside workforce - whilst our indigenous workforce apparently for some reason did not cut it and was consigned by government policies to benefits Britain.

The 'new way' you and Miliband would take us, is back to the decline of the 1970's. If a government heaping loads of tax, red tape and other shit on companies concentrates on setting salaries on small to medium sized businesses they cannot afford e.g during the worst recession in 80-odd years, there won't be jobs, as modern day France following similar socialist policies, confirms.

In your insular economic country, similar again to France's anti globalism, education does not really matter, yet you think that there has to be higher paid jobs to those that can't count?

www.telegraph.co.uk/education/educationnews/10631728/Pupils-cannot-count-out-change-due-to-poor-maths-skills.html
“One question involved asking them to calculate the correct change from £100 if they had bought shopping totalling £64.23, but more than half – 52 per cent – gave the wrong answer. It emerged that more than a quarter were more than £1 out.”

“England’s young adults trail the world in literacy and maths”.
www.bbc.co.uk/news/education-24433320
"Young adults in England have scored among the lowest results in the industrialised world in international literacy and numeracy tests."

www.telegraph.co.uk/education/educationnews/9322525/School-leavers-unable-to-function-in-the-workplace.html