The Great Crude Exodus: Why a New Crew Change is Forming in Oil & Gas


Subscribe HERE


Abstract

A growing distaste for the oil industry among potential young employees, combined with the economic crisis of the pandemic, is making it difficult to attract the talent of the future. This growing perception problem of hydrocarbon based energy is causing young and experienced individuals alike to leave the industry in pursuit of different careers. The boom and bust nature of oil in addition to pandemic related layoffs have made it difficult to attract and maintain the talent and experience that has pushed the industry to new heights. If oil and gas companies don’t start taking perception related issues seriously, they will find themselves in a experience vacuum that stagnate any progress into the future. 


Introduction

The oil and gas industry was contracting well before the coronavirus pandemic broke out in the U.S. and brought the economy to a screeching halt. As companies reorganize by slashing capital, cutting G&A, and writing down asset values, many oil and gas jobs have been eliminated. The result is a large number of experienced personnel leaving the oil industry. One problem is the cyclic boom-and-bust stigma within the industry is causing many of these experienced professionals to leave for good. This is not the first time there has been an exodus from the oil and gas industry. After the 1986 oil crash, the industry experienced “the Great Crew Change” in which a twenty-year workforce age gap developed as a result of the major downturn. Industry leaders were nervous about a similar phenomenon arising from the 2014-2016 downturn that saw thousands of individuals leave the industry and dissuaded new entry by the younger workforce. With this second “once in a generation” downturn over the last five years, the exodus of experienced professionals and an inability to attract younger generations has created a second crew change. An estimated 118,000 U.S. jobs have been eliminated from the oil and gas sector between March and July of this year with an anticipated 32,000 more vanishing by the end of 2020. As the “great crew change” continues to phase out older employees through retirement, younger experienced professionals are also permanently leaving the industry while even younger generations are considering other career choices. This mass exodus of talent from the industry is creating another experience gap vacuum, and will be a detriment to the development of oil companies as they transition into the digital future.


Job Losses

In the oil industry there are booms and busts with some larger than others. The 2014-2016 bust was labeled as a “once in a generation” downturn that rattled the industry. Now, just five years later, the industry has been rocked by a second. The fossil fuels industry lost an estimated 118,000 jobs from March to July as the coronavirus pandemic destroyed demand for petroleum products and electricity [2]. The losses in oil, natural gas, and coal jobs represent a staggering 15.5% drop in employment for the energy sector, which has been struggling in recent years as developed nations have shifted toward more sustainable sources of energy [2]. The struggle will not be disappearing any time soon as experts predict employment could fall to a 15-year low in the coming months. Furthermore, many believe the lost jobs and industry as a whole may never fully recover due to industry consolidation allowing production of more crude with fewer workers.

To give a more detailed picture, the current situation in Texas can be analyzed. Like many other industries battered by the coronavirus pandemic, drilling and oil-field service companies operating in Texas were chugging along prior to global shutdowns. Once the Saudi-Russia price war began, the coronavirus caused global economies to shut down, and societies sheltered in place; the industry only employed a mere 162,350 workers in June. This was down from 208,450 just four months prior [1]. The 46,100 jobs lost from February to June in production and oil-field services as the pandemic crushed demand for crude and oil companies cut capital budgets and halted production amid historically low oil prices provides a grim look into the state of the industry.  But the future looks just as harsh for the lone star state. Karr Ingham, the chief petroleum economist for the Texas Alliance of Petroleum Producers, said he expects oil and gas production employment in Texas to fall to around 150,000 in the next three months, which would be the lowest since 2005 [1]. With the domestic unemployment rate hovering at 10.2% in July, a 28% unemployment rate in the oil and gas industry is foreboding for any individual, in the industry or out [8]. While oil lost the most workers among fossil fuels, shedding 69,400 jobs or 17% of the pre-pandemic workforce, these numbers dwarf in comparison to the predictions proposed by experts [2]. Although the U.S. energy sector added 5,800 jobs in July, there are still more than 1.1 million energy workers in oil, natural gas, coal, nuclear, power generation, transmission, motor vehicles, and fuels who are out of work nationally [2]. At the current pace of job growth, it would take more than 16 years to recover the energy jobs lost since February, and the worst appears to still be ahead.


The Great Crew Change

The Great Crew Change used to be a phenomenon that everyone in the oil and gas industry could easily describe. It referred to the large age gap in the oil and gas workforce, where most engineers and geoscientists were either over 55 or under 35 [4]. How did this happen? One of those “once in a generation” downturns that shaped the industry. This time, it truly was once in a generation and it did shape the industry in more ways than imaginable. In the 1970s, oil prices skyrocketed, and thousands of Baby Boomers studied petroleum engineering, geophysics and other energy professions. But after oil prices crashed in 1986, U.S. oil and gas drilling slowed, and only a few members of Generation X entered the industry due to lack of jobs [6]. U.S. oil-and-gas extraction jobs fell by nearly 30% from 1982 through the end of the decade, according to Bureau of Labor Statistics data [4]. Many firms sharply curtailed hiring or stopped altogether, leading to a generational gap that haunted them for years.

Figure 1: 2015 Age Gap in the Oil and Gas Industry [3]

When the shale drilling revolution began in 2008, there were not enough professionals to meet demand. The American Petroleum Institute estimated in 2014 that 50% of the industry’s workforce was on the verge of retirement, and the next person in line was on average 20 years younger [6]. Basically, the older crew that comprised half a company’s workforce would be leaving the industry to go spend time with their grandchildren, golfing, or playing sudoku puzzles leaving the company shorthanded and inexperienced. Real world experience that can’t be taught in school, by reading a book, or studying a report was lacking for many younger professionals. This experience is a skin-in-the-game type of struggle that requires engineers and geoscientists to consider all the variables, risk, investment, and geologic factors that E&P companies face every day [3]. CEOs lamented the shortsightedness of layoffs in the 1990s that discouraged an entire generation from joining the industry. Problematically, they are making the same mistakes today.


Generation Shift – Job Security and the Environment

A growing distaste for the oil industry among potential young employees combined with the economic crisis of the pandemic could make it harder to tackle competition from the renewable energy sector and electric vehicles. The next generation of workers appears to have two key goals on their mind: job security and the environment – among the top two perception problems of the oil and gas industry as the stigma against fossil fuels grows in younger generations. In fact, 62% of teens ages 16 to 19 say a career in oil and gas is unappealing with 39% saying the industry is very unappealing, according to a survey of 1,200 young Americans released by EY [5]. Those numbers are significantly up from the 44% of those aged 20 to 35 who said they are not attracted to oil and gas jobs, while 45% still are [5]. The distaste by the younger crowd (16-19) appears to be more environmentally motivated while the older group (20-35) appears to be concerned with job security. How can one tell? By looking at the top ten places Gen Z wants to work, and then by checking into one of the largest Petroleum Engineering schools in the country, Texas A&M.

Glassdoor recently released key findings showing where Gen Z desires to work and what they are looking for. Their findings: individuals are seeking a “relaxed work environment, flexible hours and good pay” [9]. Only one of those are associated with the oil and gas industry and the other two are quite laughable if used to describe the workplace. These descriptions more closely align with trends Glassdoor is noticing. A shift towards environmentally friendly, software focused, technology heavy, and sales driven companies like Amazon, Google, Deloitte, and Tesla [9]. Combined with industry attraction, YPulse released findings that the number one concern of individuals aged 13-17 and 18-36 was climate change and the environment [10]. Due to an overwhelming impression that the oil industry is low tech and harmful to the environment, future generations are deterred from pursuing a career in an industry that goes against many things they believe are important to their future. In addition, many older individuals are being pushed out of the industry due to the job market. As of early August, only a third of the petroleum engineers who graduated this past spring from Texas A&M University with a bachelor’s degree had a job, while about 70% of the class of 2019 had found jobs by that time last year [4]. These statistics combined with environmental concerns are pushing young professionals away from the industry, and it is clearly seen with the drop in enrollment rates for petroleum-engineering programs around the country. Figure  2 shows this massive change in enrollment. 

Figure 2: Dropping Enrollment Rates In Petroleum Engineering Programs [4]

The environment isn’t the only reason why young people seem to be shying away from careers in oil and gas. The industry has a long history of booms that create tons of jobs followed by massive busts that end abruptly with tears and layoffs. That notorious reputation was solidified during the previous oil crash that caused dozens of bankruptcy filings and an estimated 200,000 job cuts [5]. The energy sector has become a tough place to start a career right now. There are graduates who went to good schools, got good grades, and yet they don’t have a job. That uncertainty can spook anybody. Big Oil’s environmental issues, whether valid or not, and boom-to-bust nature have created a negative stigma that will make it difficult to attract talent in the future. Younger generations see the industry’s careers as unstable, blue-collar, difficult, dangerous, and harmful to society [5]. They want to work for what has been advertised as the energy of the future, and they see oil and natural gas as their parent’s fuels – theirs are renewables and green energy.


Conclusion

Energy giants including Chevron Corp. and BP PLC are trying to avoid creating a generational gap in their staffs—a problem they’ve faced in previous downturns—that could make it more difficult to tackle industry-changing competition from renewable energy and electric vehicles [4].  There were about three-quarters of the number of jobs in oil-and-gas production or services at the end of last year than five years earlier [4]. Companies were able to shrink their workforce while increasing production thanks in part to automation and greater use of data science, artificial intelligence, and machine learning [4]. While these may be the technological advancements many individuals in younger generations are searching for, it is not the job security they are seeking. With continued advancements, their job may become obsolete. But the real problem lies in the ebbs and flows of the industry. When it’s good, it’s great. When it’s bad, it’s awful. That is what all oil and gas companies are up against. Especially in a time when two “once in a generation” downturns have occurred within five years of each other. Young people want to work for the energy companies of the future, and in their view hydrocarbons are not the future.

Unfortunately, the industry has a perception problem. It is perceived as low tech, free of environmental goals, and void of all job security. Some of these are true, but many are not valid. With 118,000+ jobs lost in the current downturn paired with the 200,000+ jobs lost just five years prior, these numbers prove once again that an oil and gas professional’s career is defined by price volatility and there is in fact no job security. Engineers are smart people capable of working successfully in industries that promise sustained employment rather than a rollercoaster. If oil and gas companies don’t start taking career stability seriously, they will find few takers when they put out the Help Wanted sign [3]. Truly only those invested in the science and development of these resources will survive. Chasing a paycheck during the up-cycles will only result in professionals leaving during the downturns.

Luckily for the industry, fossil fuels are not going away anytime soon. The world still needs hydrocarbons to fuel society, and many of the jobs that exist now will most likely continue to exist well into the future. To make sure there are no experience or generational gaps, many major oil and gas companies are still hiring, regardless of upcoming layoffs. Rather than continue repeating the history of the past, these companies should pivot to embrace digital innovations. The result will be more efficiencies leveraging a technology-centered knowledge base to employ younger generations while still maintaining the existing technical background. They have made the mistake before and need to change the perception of their workforce for the sake of the survival of their businesses.


References

[1] https://www.houstonchronicle.com/business/energy/article/Oil-and-gas-employment-forecast-to-bottom-out-15446433.php

[2] https://www.houstonchronicle.com/business/energy/article/U-S-oil-and-gas-industry-sheds-118-000-jobs-15505020.php

[3] https://www.forbes.com/sites/drillinginfo/2015/05/04/the-great-crew-change-why-its-even-more-complicated-now/#52fd74db11de

[4] https://www.wsj.com/articles/oil-industry-frets-about-recruiting-its-next-generation-of-workers-11597763882?mod=hp_lead_pos5

[5] https://csirecruiting.com/young-people-hard-attract-work-oil-companies/

[6] https://www.houstonchronicle.com/business/columnists/tomlinson/article/Energy-companies-are-forgetting-the-lesson-of-13271735.php

[8] https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

[9] https://www.glassdoor.com/research/gen-z-workers/

[10] https://www.ypulse.com/article/2019/06/25/both-gen-z-millennials-believe-this-is-the-biggest-problem-their-generation/

Categories

Send Us a Message

5 + 3 =

1224 Washington Ave,
Suite 10
Golden, CO 80401

(720) 772-7371

contactus@rarepetro.com

Rare Petro Logo

Subscribe!

Oil & Gas News Pulse

Newsletter

You have Successfully Subscribed!