With the energy industry’s recent surge in hiring now showing signs of a slowdown, the jobs outlook in upstream oil and gas has reached a stop-and-take-a-breath moment.
Future prospects still appear positive. But in the near term, the next year or so looks more like a question mark.
The big post-pandemic rebound in energy demand kicked off an industry hiring boom during the past two years. That led to new job openings, wage and salary increases and even some scattered worker shortages.
Waiting and Seeing
In today’s business climate, oil companies are focused on disciplined spending. They’re taking a deep breath and watching the economy closely, cutting back on hiring growth and looking for any indication of reduced energy demand – or even recession.
Recent data from the Bureau of Labor Statistics reflected minimal oil-industry hiring activity in March 2023, as many U.S. economic sectors went into a holding pattern:
“Employment showed little change over the month in other major industries, including mining, quarrying and oil and gas extraction,” as well as construction, manufacturing, wholesale trade, financial activities and other services, the BLS reported.
In late March, the Federal Reserve Bank of Dallas reported results from a survey of 137 oil and gas firms in the Fed’s District Eleven, covering Texas, southern New Mexico and northern Louisiana.
“Growth in the oil and gas sector stalled out in first quarter 2023, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index, the survey’s broadest measure of conditions facing Eleventh District energy firms, was 2.1 in the first quarter, down sharply from 30.3 in fourth quarter 2022,” the agency reported.
“The near-zero reading indicates activity was largely unchanged from the prior quarter, a break from the more than two-year stretch of rising activity,” it noted.
When energy executives in the survey were asked to predict how employee headcount at their companies would change from December 2022 to December 2023, more than half – 55 percent – predicted the total would remain about the same.
But 37 percent expected the number of employees to increase, and only 8 percent projected a decrease over the period.
Help Needed … Maybe
Airswift, an international workforce agency in engineering and technology, identified a challenge and a dilemma for energy hiring in its Global Energy Talent Index 2023. The index is a review of recent employment trends in the industry.
Oil and gas companies want to avoid over-hiring and enduring another round of layoffs if energy demand weakens. At the same time, the industry needs to continue attracting, hiring and retaining skilled employees, and it’s in direct competition with other sectors for talent.
“The oil and gas workforce is one of the most in-demand workforces across all the energy sectors. With soaring energy prices and skills shortages across the board, oil and gas salaries have reached record heights,” said Callum Donaldson, Airswift oil and gas director.
However, according to the GETI survey, “oil and gas risks losing talent to other sectors, from technology to renewables,” he noted.
OPEC introduced another variable in the energy outlook on April 2 with its unexpected imposition of additional production cutbacks. Those cuts total about 1.16 million barrels a day and the cartel announced they would remain in effect until the end of 2023.
In a release, OPEC called the reductions “a precautionary measure aimed at supporting the stability of the oil market.” Most analysts saw the move as a ploy to prop up oil prices, and also an attempt to get ahead of any coming downturn in global economic activity and oil demand.
Acknowledging the additional OPEC cutbacks, the U.S. Energy Information Agency still remained cautious about the potential for higher oil prices and industry growth. In its Short-Term Energy Outlook released in mid-April, the EIA raised its projected Brent crude spot price by $2 per barrel, but added:
“Despite our higher price forecast, recent issues in the banking sector raise the potential that economic and oil demand growth will be lower than our forecast, which has the potential to result in lower oil prices.”
Some cooling off in the super-hot energy hiring market could be expected. According to the U.S. Department of Labor, oil and gas sector unemployment fell to less than 1 per cent in January this year, then rebounded to 3 percent in February.
Hiring Competition with Other Industries
The possibility of over-hiring and layoffs is a real threat for the industry. Online, data and social media companies went on a hiring spree during the pandemic, as people increased their use of online tools and resources. When that trend reversed, tech companies laid off more than 315,000 employees, according to Layoffs.fyi.
Airswift’s GETI 2023 report found that 44 percent of the energy sector employees it surveyed had received a pay raise in the past year, and almost a quarter received a raise exceeding 5 percent. An amazing 80 percent of those surveyed said they had received another job offer or outside job overture.
“In hand with an industry experiencing a huge surge in growth, the recruitment market continues to be highly competitive, with nearly a third (31 percent) of respondents saying they have been approached about a position in another company six or more times,” the report found.
“And while 68 percent of respondents say they are satisfied in their current role, only 13 percent would not consider switching to another role,” it added.
“The oil and gas workforce is becoming increasingly empowered to shop around for jobs based on interests and values, as well as pay. Beyond remuneration, employers will need to compete on differentiators from flexible working to ESG performance,” Donaldson observed.
In fact, 85 percent of energy employees said they have already considered switching jobs, according to the GETI report. And it found that the United States is not the top choice for employees considering a relocation.
“Europe remains the leading destination for 27 percent of those wanting a foreign transfer, with the region reviving fossil fuel investments to fill the void from Russian gas imports,” it reported.
“The Middle East has supplanted North America as the second-choice destination, as workers are drawn by the lure of low taxes and booming Middle Eastern infrastructure development. North America rounds out the top three alongside Asia,” it added.
When hiring growth resumes in upstream oil and gas, it could have room to run. According to BLS data, the sector’s employment total is still only 84 percent of the pre-COVID count in 2019 when U.S. spot crude oil prices were below current levels – and just 70 percent of 2014 employment totals.
Energy firms will be in an increasingly competitive hiring market for skilled and experienced employees. As job growth returns, oil companies will contend with other industries like renewables and tech for specialized talent.
“Looking ahead, the struggle for talent will involve a spectrum of factors, from decarbonization to diversity,” Donaldson noted. “The (oil and gas) sector must broaden its skills base by appealing to individuals in new competitor sectors.”