Texas Oil Doesn't Create Enough Jobs


Texas is witnessing a fresh oil boom with June production hitting 4.3 million bpd, all thanks to two things: efficiency improvements and, of course, oil prices. But not everyone is happy about this. The higher efficiency means that fewer new jobs are needed.

This is one of the takeaways from the latest Texas Petro Index from the Texas Alliance of Energy Producers, as presented by oil economist Karr Ingham.

Oil production over the 12 months to June, Ingham said, rose by an impressive 27 percent, and while not a priority for drillers in the state, natural gas production has also increased. Yet it is taking fewer rigs to pump more oil, and also fewer workers.

The oil price collapse of 2014 forced producers to bet on efficiency, on doing more with less, and now they are reaping the fruits of their labor: they have learned how to boost production from one single well without adding more rigs. They have also learned to make longer laterals—the horizontal part of the well in the shale rock—and they have learned to pump more sand and chemicals into these laterals.

This has led to lower demand for workers as reflected in the Texas Petro Index. As of June, the number of direct upstream jobs in the Texas oil industry totaled 228,600. Some 47,000 new jobs were added after the crisis, which had wiped out as many as 115,000 jobs. Although job creation will continue in the second half of the year, chances are it will continue at the same slow pace compared with production growth.

Despite the not so good news about oil jobs, Texas continues to reign supreme in U.S. oil and gas: as of June, the Lone Star State produced 40 percent of the nation’s total oil output and 30 percent of its natural gas output. More than half of active drilling rigs in the United States are in Texas and almost 54 percent of direct upstream jobs are there, too.

Drilling permits are down from last year, but well completions are up, and considerably, by 79.2 percent. The value of oil produced is also substantially higher thanks to the improvement in international prices. However, Texas drillers have their woes as well, and price is one of them.

The problem stems from a pipeline shortage in the Permian that has forced local drillers to sell their crude at a discount to get it to refineries—a discount that saw Midland crude trade US$19 a barrel lower than Brent, the international benchmark. This pipeline shortage was a result of the quick expansion of production in the prolific basin after the crisis.

The Permian, which produced the bulk of Texas’ oil output at 3.33 million bpd in June, has some of the lowest-cost acreage, which spurred an oil rush there over the last three years. The rush is paying off in terms of production as evidenced by the latest Texas Alliance figures, but both the pipeline shortage and the slow job growth continue to hang over the industry.

Irina Slav for OilPrice.com