As a glut drives continued declines in global oil prices, global oil corporations are rolling out large-scale restructurings one after another. With productivity rising thanks to technological innovation, it appears they judge that the oil industry no longer needs a vast workforce.
According to the Wall Street Journal (WSJ) on the 30th of last month (local time), ExxonMobil, the largest U.S. oil corporation, said it will cut 2,000 employees worldwide. That equals about 3% of its global workforce; as of last year, ExxonMobil had about 61,000 employees.
An ExxonMobil Spokesperson said by email, "Our global office network was built decades ago in an environment very different from today," and added, "Because collaboration is key to success, we are reorganizing our global hubs and integrating teams to align with our operating model."
This is the first time in five years that ExxonMobil has launched large-scale layoffs since it announced cuts of up to 15% of its global workforce during the COVID-19 pandemic in 2020. Hit by a crash in oil prices at the time, ExxonMobil recorded an annual loss of $20 billion (about 28 trillion won) and laid off 1,900 people in the United States alone. The WSJ said the latest layoffs are an extension of the corporate restructuring that began then.
Last month, ConocoPhillips, the third-largest oil and gas producer in the United States, announced it would cut as much as a quarter of its total staff by the end of next year as part of expense reductions. Including full-time and contract workers, about 2,600 to 3,250 people are subject to layoffs. In addition, U.S.-based Chevron and U.K.-based BP also said they would carry out layoffs numbering in the thousands this year.
Large-scale layoffs by oil corporations are closely tied to falling oil prices. In 2014, when oil topped $100 (about 140,000 won) per barrel, employment in the oil industry peaked at about 200,000. But the following year, as the Organization of the Petroleum Exporting Countries (OPEC) moved to aggressively boost output, prices plunged and numerous drilling companies were pushed into bankruptcy.
This year, international oil prices have continued to slide as OPEC+—a consortium of major oil producers including OPEC and Russia—has increased production. As of the day, U.S. crude traded at about $62 (about 87,000 won) per barrel, down more than 20% from about $80 (about 113,000 won) in mid-January. With international oil prices tracing a downward curve for years, profitability at oil corporations has severely deteriorated.
Oil corporations that must adapt to lower prices have already found ways to pump more crude with fewer people, the WSJ reported. In the past, drilling in the Permian Basin of West Texas and New Mexico took more than two weeks; now, horizontal drilling stretching 2 miles (about 3.2 km) can be finished in just four days.
Workforce size and productivity are now moving inversely. According to the U.S. Bureau of Labor Statistics, since 2015 the number of oil and gas extraction workers in the United States has fallen by about 80,000, but crude output over the same period has risen 45% to a record of about 13.6 million barrels per day.
Clint Concord, executive vice president of operations at pipe services company Bird Oilfield Service, said, "Major oil corporations want service firms like ours to cut the staffing we assign to certain tasks, such as installing drill pipes, to about one-third of prior levels," adding, "A large portion of manual work is being replaced by robotic equipment. A 'new era' is opening."
The WSJ noted, "What stands out is that such large-scale layoffs do not affect oil and gas output," and added, "Because major oil companies hire drilling and hydraulic-fracturing crews, who in turn support the livelihoods of smaller service firms, workforce reductions could have ripple effects across the industry."