By: Dakota Gillespie
According to vox.com, oil prices started to drop the day after Thanksgiving, largely due to the meeting OPEC had in Vienna on November 27th.
Saudi Arabia, the most influential OPEC member, convinced OPEC members not to cut production so that they may maintain their market share of the world’s oil production. (Click here for information and graphs that shows fluctuations in oil prices over the last few years.)
But OPEC members all over the world, not including Saudi Arabia, are being hurt by the decision they made not to cut production.
CNN Money and other news sources have been discussing the consequences of the price of oil per barrel being as cheap as $50.00. This is great news for the modern day citizen, but for those that work in the oil field it is a true catastrophe.
On 1/16/2015 there were 1,610 drilling rigs in the United States drilling for oil. As of 2/6/2015, there were only 1,140 rigs in the United States drilling for oil. So in this 3 week timeframe, 470 rigs quit drilling for oil and are no longer in operation. This also means that in that same three week timeframe, 11,280 people were directly out of a job, not counting the service companies that provide special services for these rigs. These numbers are shocking! (Rig count data is also available to the public through Baker Hughes website. http://www.bakerhughes.com/rig-count)
With every drilling rig that stops drilling (due to the lack of oil to drill), typically 24 hands are directly affected by losing their job–and this does not include the companies that provide special services to these drilling rigs. The attached Baker Hughes reports show that in one week (week ending 1/30/2015) 94 drilling rigs were taken out of service. This means that 2,256 workers were directly affected by losing their job that week. Again, this does not include the employees of service companies that worked on those rigs.
Oil field workers work long hours of hard, physical labor and makes lots of sacrifices to provide a living for their loved ones. A typical shift on an oil rig is 12 hours in duration. Workers are typically away from their families for a week or two at a time. For young adults in oil field towns the money oil field workers can make seems enticing, but not many are told about the missed school functions, athletic events, family gatherings, birthdays, anniversaries and even holidays. There is no such thing as calling in sick, like someone typically would that worked a 9-5 job. Those are the things that people outside of the oil industry don’t know about, but it is well known by the families of the oil field workers that experience such things.
The money that oil field workers make (a mean salary over the last 4 years of $92,500) is spent directly into the community. Businesses in oil field towns would not exist without drilling rigs putting oil field employees to work. Quite possibly, oil fields and oil field workers financially affect communities more than any other industry and this does not include oil field service companies. If you think about the houses they build or buy, the vehicles they buy or lease, the food they purchase to feed their families, and the purchases they make as consumers, you would know why these businesses are still operating. They provide more jobs in their local communities by providing work to other industries.
So next time you think about how great it is to buy gas below $2.00 per gallon, think about the workers that can’t pay their rent, put food on their tables, or buy clothes for their kid(s) because they were directly affected by your price of gas.
Drilling rigs in the United States totaled at 825 rigs that are drilling as of 3/20/2015. This is down 48% from the all time high of 1,601 rigs from 3/4/2011. The United States gauges the price of oil on the commodities market by WTI (West Texas Intermediate) and it is staying around $49/barrel of oil. In order for companies to pick up drilling rigs and actively hire people to work back on their drilling rigs, WTI oil needs to reach around $65-70/barrel. The price of oil dropping has largely to do with the giant surplus of oil in the United States inventories. Our surplus in production is expected to maintain or increase its level until at least this July.
Factors would positively help the price of oil are as follows:
Oil executives are in discussions with the United States government to expand the exporting capabilities of raw crude oil. This would bring the price of oil up. The price of oil will also greatly be affected by the OPEC meeting on June 5, 2015 in Vienna, Australia. If Saudi Arabia (Biggest influence in OPEC) decides to cut their production, that would also bring the price of oil up.