LONDON, Nov 1 (Reuters) - Jobs related to oil and gas drilling account for more than one in eight of all net new nonfarm jobs in the United States since 2003, and almost one in five in the private sector, according to an analysis of data from the Bureau of Labor Statistics (BLS).
Oil and gas drilling is one of the fastest growing sectors of employment, as near-record prices spur a massive expansion in activity and employment.
The number of jobs related to oil and gas drilling has risen by almost 200,000 (80 percent) since 2003, and the sector now employs about 430,000 workers, according to BLS (Chart 1).
Over the same period, total nonfarm employment rose just 1.49 million as a result of the recession.
Oil and gas employment bounced back quickly from a short sharp drop in the immediate aftermath of the financial crisis, when U.S. crude prices dropped to less than $50 per barrel, and now stands at the highest level for more than two decades.
BLS does not break out jobs in oil and gas drilling separately. But in the earlier part of the decade, most of the extra employment was in the gas sector, before switching to oilfield work in recent years, as gas prices have fallen and rig crews and support services have been redirected to focus on liquid-rich plays (Chart 2).
Job creation correlates well with increased oil and gas output, with U.S. crude production rising for the first time since the mid-1980s, and gas output leaping to confound earlier predictions of a peak (Chart 3).
Driven by surging oil prices, economist Adam Smith’s “invisible hand” is well on the way to re-allocating resources from sectors with over-capacity (real estate, construction and financial services) to long-neglected old economy sectors where supply has fallen short of demand because of decades of under-investment (oil and mining).
Past experience shows structural economic changes take time, and are achingly slow in the early stages. But the longer prices remain high, the more adaptation will accelerate, explaining why oil has always been, and will remain, a cyclical industry.
Anecdotally, most of the new jobs are still comparatively low-skilled. There are still shortages of higher skilled construction workers and experienced engineers and scientists for activities such as surveying, well design and project management, putting upward pressure on wage rates and costs.
Skill shortages such as those highlighted by the Society of Petroleum Engineers (SPE) and the National Academy of Engineering (NAE) in surveys will continue to plague the industry for some years. But growing demand and rising compensation in an otherwise stagnant labour market will eventually cure them.
In time the focus of graduate study programmes (especially quantitative disciplines such as mathematics, physics and engineering) will shift from training surplus “financial engineers” into producing more petroleum engineers as both schools and students respond to the altered pattern of salary and career incentives.