Schork Oil Outlook: Drilling-Ban Joblessness
Hopefully those “green jobs” will be kicking in anytime soon now!
According to the latest Beige Book from the US Fed, a number of businesses in the Gulf Coast region expressed concern about the potential impact on long-term energy production and employment from the deepwater drilling moratorium.
The Dallas District was blunter: “contacts in the energy industry said the moratorium on deepwater drilling resulted in significant regional layoffs…”
The industry is thus expediting recertification of deep and shallow water rigs/wells. In the meantime, service companies were shifting Gulf Coast workers to land or shallow water projects when possible; although wage pressures were mostly nonexistent.
To wit, the Kansas City District noted the strong prospects for onshore output and firms planned to increase the workforce in the next three months. The potential development of the Niobrara oil shale in northeastern Colorado and eastern Wyoming was even mentioned. However, a dearth of qualified workers (and a surfeit of unemployed workers) was expected to keep a lid on wages.
As we have spoken ad nauseam, the US oil and gas extraction industry is one of the highest compensated sectors in the entire economy. It is an industry that employs over 160,000 Americans with average weekly earnings twice the US average.
Last Friday, the Office of Management and Budget (OMB) released (at 3:00pm ahead of a summer weekend… wink, wink… nudge, nudge) its Mid-Session Review on its budget published in February. In it the OMB predicted the average unemployment rate will remain above 8 percent through 2012.
Thus, the anecdotes delivered from the Dallas and Kansas City banks are an obvious concern; especially in light of yesterday’s (consistently) dismal weekly jobless report, as illustrated in the chart in today’s issue of The Schork Report.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.