However, the diminished oil prices are not good news for everybody. The Oil Bust of 2015, as it has hence been dubbed, has forced more than 75,000 layoffs in the energy and oil industry thus far, according to Forbes. The rate of layoffs/forced retirements have been rapidly increasing as the prices at the pump continue to free fall. CNBC reports that in January, the oil industry helped to send the overall total of job cuts in the US up 40% from December.
While the oil industry makes up only a tiny section of the American economy, the layoffs could spell some serious trouble in the industry, naturally, and also in the overall economy. Most of the 600,000 workers in the US oil and gas sector of the economy make a very solid middle class wage, many amassing more than six figures. A spike in unemployment of the middle class could be very problematic to the overall economies of many Western regions, as a reduction of this well-to-do demographic means that less money is pumped into local markets.
But what is the panic? Won’t the market just correct itself, as economic theory says is inevitable?
While it is natural for specific industries to experience highs and lows from decade to decade, the oil and gas sector may not be able to bear the brunt of the Bust of ’15. The current oil industry is comprised of a great many startup workers, aged under thirty, and longtime veterans, who have been working related jobs for over thirty years, says Forbes. There is a gigantic shortage of middle-aged, midcareer professionals in the industry due to the last major bust in the 1980’s. The low oil prices created fewer openings in the industry, which in turn dissuaded young workers from pursuing careers in the field. Colleges and universities cut their petroleum engineering programs, and the whole sector of the economy was forgotten by an entire generation. The industry is feeling the consequences of this phenomenon right now, as a disproportionate chunk of their workforce is nearly of retirement age.
The current bust is threatening to eliminate another generation of future oil and gas industry professionals, which could have disastrous consequences in the years to come.
What’s more, the young workers who are currently employed in the industry are feeling the need to ditch the sector and pursue another career. Many may to the construction industry, as their skills are directly translatable.
Nobody is sure when the economy will right itself. The oil and gas industry is vulnerable to every caprice that the global economy can muster. However, some speculate that the American government could potentially mitigate the issue by lifting its 40-year US ban on crude exports, reports Business Insider. Predictions stipulate that between 394,000 and 859,000 American jobs could be created annually from 2016 to 2030 if the US decides to modify its policy on oil exports. These jobs would not be confined to the oil industry, either. Trucking and shipping, among others, would see a welcomed growth in industrial activity.
If you’re in the oil & gas industry and are experiencing cash flow problems, Factor Finders can help. If slow-payments are draining your funds, factoring for the oilfield services industry could be a way to avoid laying off employees and help keep your business booming.