Oil patch recession wipes out more than $4 billion in wages

Oil workers in the Permian Basin outside Midland, Texas
Brittany Sowacke | Bloomberg | Getty Images
Oil workers in the Permian Basin outside Midland, Texas

As the price of crude shows little sign of a resurgence to its levels from two years ago, some parts of America's oil country are taking a much bigger hit than others.

When global oil prices crashed in late 2014, U.S. oil fields braced for lost jobs and wages. So far, the oil bust has taken a $4 billion-dollar bite out of oil patch workers' paychecks, according to the latest data available from the Bureau of Labor Statistics, with no recovery in sight.

American oil and gas producers have seen more than their share of booms and busts since 1901, when the first gusher in Spindletop, Texas, ushered in the modern era of oil and gas production. The latest U.S. production surge, interrupted briefly by the Great Recession, was sparked by a new generation of drilling and exploration technologies that revived hundreds of oil and gas fields once thought to be fully depleted.

From 2010 through 2013, industry employment surged by 30 percent, more than triple the pace of overall U.S. payroll growth. Many of these new workers were well paid; during the same period, the average annual wage for oil and gas workers rose by 6 percent, to $155,000.

But the crash in oil prices — from nearly $110 a barrel in July 2014 to less than $50 six months later — brought a painful retrenchment. The number of rigs in operation fell in tandem with prices — from a peak of nearly 2,000 in late 2014 to just over 400 earlier this year. (Drilling has picked up a bit, to 588 rigs, as of the week of November 18.)

The shutdown brought a wave of layoffs — some 20,000 since employment in the sector peaked in 2015 — along with pay cuts that have taken a big bite out of oil-patch wages.

According to the latest data available, from the first quarter of this year, wages for workers in the oil and gas extraction industry were more than a billion dollars less than the first quarter of 2015. On an annualized basis, that represents more than $4 billion in lost wages.

The sector employs people from a wide range of occupations, from field workers to computer programmers, truck drivers to office administrators. Last year, the industry generated more than $31 billion in wages.

The overall figures mask a wide range of economic impact on the hardest hit states and counties whose economies rely most heavily on oil and gas production. Oil and gas industry wages in California, for example, fell by more than $300 million in the first quarter. But the industry makes up a much smaller share of the state's overall employment than the national average.

In Oklahoma, on the other hand, oil and gas industry jobs represent roughly 10 times the national average on a per-capita basis. The Sooner state has been among the hardest hit, with oil and gas industry wages falling in the first quarter by nearly $1 billion on an annualized basis.

The contrast is even more pronounced at the county level. Harris County, Texas, which is home to Houston, saw wages drop by more than a billion dollars on an annualized basis in the first quarter. That's a big hit, but represents less than one percent of total wages in the country, according to the BLS data.

In much less populous Washington County, Oklahoma, oil and gas industry wages dropped by $11.5 million in the first quarter, or more than $45 million on an annualized basis. That's nearly 4 percent of all countywide wages, according to the latest BLS data.