Byron King: OIL BOOMS AND BUSTS

Over the past 25 years, the “growth” in oil reserves estimated to be in existing oil fields has actually exceeded the additions to reserves from new discoveries. The implication is that the existing oil fields of the world are as important, and maybe even more important, than the prospective new discoveries out in wildcat country.Byron King explores…
Recently, I attended the American Association of Petroleum Geologists (AAPG) convention in Long Beach, California. As I walked among the poster presentations and sat in on the technical discussions, I was struck by the high scientific quality of the work coming out of what you might call the “nontraditional” locales. There were geologists from Russia, China, Indonesia, Nigeria, Egypt, Algeria, Brazil, Mexico, Venezuela and many more nations of the world. Really, it seemed to me that every one of them had one or more areas of technical competence in which he or she was building a true reputation. This has a lot of implications for both the present and the future, but what it says in a big way is that knowledge and technical competence in the field of geoscience is not solely resident in the United States or Western Europe. The oil industry is truly a “global” industry, for as much as that expression is overused.

AAPG has about 30,000 members now, about half the number that it had back in the early 1980s. This is another way of saying that things were booming in the oil biz back then. But many people who worked in the geology business were laid off during the mid- to late-1980s and throughout the 1990s, due to what we look back and call the “oil bust.” From its high price of about $50 per barrel back in 1980 (using the dollars of that era, and it would be over $100 per barrel today in our inflated U.S. bucks), oil crashed in price to near $5 per barrel by the mid-1980s, a 90% fall in price.

With that fall in price came massive layoffs in the industry. The layoffs totaled well over 1 million jobs in all (geologists, engineers, support staff and many other job classifications, according to the U.S. Department of Labor). This number of layoffs actually exceeds the combined job losses of the U.S. steel and auto industries over the past 25 years. So the long-term crash of the U.S. oil patch claimed and ended many promising careers. This matters quite a bit right now because, as the oil industry is booming again, there is a severe shortage of skilled personnel.

Costs for everything in and around the oil patch are rising. Many projects are on hold due simply to the fact that there are not enough experienced personnel available to do the work. The only way for a person to get experience in the oil industry is to work in the oil industry, but the ranks are missing an entire generation that either was laid off in the 1980s and 1990s or was never hired in the first place. It will take many more years to rebuild the critical cadre of human skills that the world’s energy industry will need over the next decades. By some counts, well over 50% of the world’s skilled geoscience work force will be retiring in the next 15 years. And the age cadre just behind these retirees is missing, for reasons that I explained above. Who will be left to do the work? The younger folks, by default, but there are not nearly enough of them out there.

Daily Reckoning, some scrolling down required.