Cheap oil is great when you're filling the tank of your car or topping off fuel for your oil burner for a last-minute winter blast. But not everyone benefits from low oil prices, as Daily Finance has reported. In particular, more forms of oil production that are costlier and economic when crude tops $100 a barrel can quickly go out of favor when prices are less than half of that.
Heavy layoffs had already begun in January, according to Daily Finance, hitting 31,000 by the end of the month. They were only expected to get more intense, and they have. Worldwide, layoffs have broken the 100,000 mark, as a Bloomberg story mentioned. The problem is that the oil industry interconnects with many others. Production requires equipment, which uses steel and other metals. Professionals buy and sell commodities. Refineries tend to specialize in certain qualities of oil. Slow product of something like tar sands oil and all sorts of companies that feel the pinch might start layoffs.
"There's not many industries where a guy with little more than a high school education can make $100,000 a year, but that's a common pay package for drilling rig workers," wrote Forbes staffer Christopher Helman. "I'm told by people who operate a lot of drilling rigs that for every rig mothballed about 40 people lose their jobs. The U.S. rig count is down by more than 700 from this time last year."
"For seven years, there was a shortage of staff," said Tobias Read, CEO of staffing firm Swift Worldwide Resources, to Bloomberg. "Now for the first time, there's a surplus. Currently almost no one is hiring."
Tens of thousands of workers of all types - drillers, commodities experts, safety inspectors, pipefitters, support staff, and many others - have pulled up their roots and headed to oil boomtowns where the pay was good. As the layoffs come, not only are they hit hard, but are likely far from friends, family, and any support network.
Australia has been hit hard. So has Canada, according to the Globe and Mail, where tar sands made expensive but available oil. Multiple companies in Calgary alone have announced significant staff reductions. Cutbacks are so severe that the Organization for Economic Co-operation and Development has reduced estimates of Canadian growth in 2015.
The U.S. is hardly immune. According to Forbes, there have been nearly 59,000 layoffs by oil service companies. Manufacturing companies have cut 7,100 jobs.
Beyond the problems the individuals and their families face is the potential impact on the U.S. economy. Not only do the layoffs mean less consumer spending, but the oil industry has represented one source of new jobs, only with good salaries, rather than the many low-paid service industry positions that have helped expand the number of jobs, but not people with much ready cash to spend.