By Bridgett Weaver, Greeley Tribune |
It’s possible some laid off oil and gas employees will remain on the sidelines of the oil patch, even when the industry starts to recover.
Oil and gas industry experts said Wednesday at the BizWest Energy Summit at The Ranch in Loveland, they don’t expect U.S. companies to make as many hires as they did in the drilling boom five years ago.
“When you do have a time of recession that’s particular to one industry, those industries use that time to improve efficiencies,” said Rich Werner, president and CEO of Upstate Colorado Economic Development. “So what oil and gas is doing right now is going through that process to adapt to the new normal.”
John Harpole with Mercator Energy LLC, said because of improvements made during the past two years, companies won’t need as many employees even if they return to the pre-downturn production levels.
“We’ve seen the productivity of the energy industry transform so quickly,” he said.
A few years ago, Harpole said if someone had asked if the oil industry could be functional at a rate of $30 or $40 per barrel, they would have been laughed out of the room.
“That breakeven price has certainly come down over the last few years,” Harpole said.
There’s no magic number, but several companies in Greeley have noted they are still profitable in today’s market, which sits around $45 per barrel. Furthermore, Harpole said he doesn’t think the price will bounce back to the July 2014 prices of $106 per barrel anytime soon — if ever.
Experts also were hesitant to put a timeline on a recovery because so many uncertain factors impact prices, which are set at a global level.
Harpole said he thinks the price will stay between $45 and $60 per barrel for “the foreseeable future,” or three to five years.
Some think the price could rise to $70 per barrel by 2020, but even that price is low compared with what it was in 2013 and 2014.
Even with a cloud of prolonged doom hanging over the oil and gas industry, Brian Lewandowski with University of Colorado’s Leeds School of Business research division said the overall Colorado economy is doing well.
“We’ve seen growth in our service industry,” Lewandowski said. The service industry includes the technology sector, which is the only industry that has consistently higher paying jobs than oil and gas. “That’s what’s helping buffer Colorado from any sort of energy downturn.”
Lewandowski said when the energy sector took a big hit in the 1980s, the fallout was decimating to Colorado’s economy. But it won’t be the same this time around.
“My conclusion is that I don’t think we’re heading toward a recession because of the downturn in the state, though we’ll see slower growth,” he said.
The state’s Department of Labor and Employment says every month they are expecting to have to revise the Greeley employment numbers down later this year because of oil and gas job losses, which Lewandowski echoed.
Though there will be losses in Greeley’s economy because of the industry downfall, some say the local economy is still diverse enough to absorb the lost jobs.
Sarah MacQuiddy, Greeley Chamber of Commerce president, said she knows jobs won’t return in the same way as they were at the industry’s height.
“I think the (oil and gas) industry has adjusted its workforce to say, ‘We want to keep these people working that we have full-time,’ ” she said. “I think efficiencies have allowed them to do some consolidation.”
But, MacQuiddy said, the other industries have helped absorb the losses and will continue to do so. Greeley’s unemployment rate is still dropping regularly.
“I’m under the impression that construction has absorbed more of the individuals because jobs were immediately available (when layoffs began). And the construction industry is just going to continue to need more and more people,” she said. “You hear of projects getting delayed because they can’t find the workforce.”
But like MacQuiddy, Werner thinks Greeley will be fine even with the consolidations.
“The interesting thing is that when you look at what’s happened over the past year, every single sector has grown except oil and gas, so those jobs have been absorbed in other sectors,” he said. “You may not see as many jobs come back in the same manner as this last boom, but other opportunities will present themselves. Oil and gas is a commodity-based business and I think Weld has the necessary historical (insights) to deal with those ebbs and flows.”