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Tuesday, May 21, 2024 | Back issues
Courthouse News Service Courthouse News Service

Collapse of Oil Prices Sinks Thousands of Jobs

HOUSTON (CN) - The world's largest oil service company laid off 10,000 workers and lost $1 billion in the final months of 2015 as oil prices plummeted, Schlumberger reported on Thursday.

Schlumberger has 105,000 employees in 85 countries, and headquarters in Houston, Paris and The Hague. It announced the job cuts Thursday in a statement announcing its 2015 financial performance.

The 10,000 lost jobs come on top of the more than 250,000 the oil industry slashed in 2015 as crude prices fell from $100 below $30 per barrel, according to industry publications.

The new year brought no relief, as crude prices dropped to $27.10 per barrel this week, the lowest price since 2003, before rallying Friday morning to just over $30.

The modest price jump came in response to cold weather driving demand for heating oil. The federal government reported Thursday that the amount of oil in storage increased by 4 million barrels last week, 600,000 less than expected by the American Petroleum Institute, a trade group.

University of Houston energy economics professor Ed Hirs told Courthouse News that the complexity of the world situation makes crude oil prices hard to predict.

"There's three, four, five or six dynamics going on here and I can't tell which ones they are," Hirs said in an interview. "We've got a bunch of financial players in there that bought a lot of oil last year, selling it forward. If they were to put it on the market, the price could drop significantly."

Hirs said another wild card is Iran, whose leaders say they will ramp up its output to 1 million barrels a day by August now that the United States and the European Union have lifted economic sanctions.

Hirs called it a "fool's errand" to speculate whether the price of crude has bottomed out. He said current prices are unsustainable in an industry that saw 40 U.S. oil companies file for bankruptcy in 2015.

"We have to wait until we see a lot of supply come online before we get to the trough. I think we're kind of at the bottom at the moment, plus or minus $3 or $4 more. Who knows, and frankly, who cares? If you're broke, it doesn't matter how broke you are: You're broke."

The price of crude is down from a peak of $144 per barrel in July 2008, due to a U.S. production boom and oversupply driven by hydraulic fracturing, which lets drillers tap oil in once-impenetrable shale.

Saudi Arabia, the most powerful member of OPEC, has contributed to the glut by refusing to curb production in an effort to defend its market share.

Hirs said it's too early to tell whether this downturn will rival the 1986 bust, when oversupplies ravaged Houston's then oil-dependent economy and one in seven people lost their jobs.

"The 1982-83 bust, when oil went from $30 to $12, that was a difficult bust, but many people survived only to get absolutely bludgeoned by the glut in 1986," said Hirs, who has lived in Houston since 1980.

"We lost a huge amount of population and it took four or five years to recover the population. People actually picked up and left town because there were no jobs. I don't know if that's going to be the case this time, but it hasn't played out yet."

Like Schlumberger, other Houston-based industry leaders have recently announced they will slash jobs.

Royal Dutch Shell said this week it will cut 10,000 jobs after its acquisition of BG Group, a British natural gas supplier, is completed in February.

BP announced on Jan. 12 that it will lay off 4,000 oil production workers this year. Chevron stated in October that it might eliminate up to 7,000 jobs, but did not say when.

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