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During the pandemic, when oil demand and prices dropped to unprecedented levels, the oil and gas industry shed nearly 200,000 jobs, equivalent to a whopping 20% of its workforce. But thanks to high oil prices and bullish market sentiment, U.S. oil and gas employment is headed toward a strong recovery, according to new research by Rystad Energy.
Almost half of the jobs lost during the pandemic have already been recovered with oil and gas employment set to jump by 12.5% this year, increasing from around 863,000 to 971,000 total jobs by the end of 2022, the report shows.
Additionally, the total number of jobs in 2027 is expected to reach 1.09 million—a marginal increase from the 1.07 million in the sector pre-Covid in 2019.
“Fueled by a rapid rise in oil prices amid a better-than-expected demand recovery and the supply constraints brought on by Russia’s invasion of Ukraine, the U.S. labor market seems poised to benefit and continue on a growth trajectory,” Sumit Yadav, an analyst with Rystad Energy, said in a statement.
This employment forecast is based on Rystad Energy’s oil price scenario in which WTI oil price averages $106 per barrel this year, $70 per barrel in 2023 and $50 per barrel toward 2025.
While the primary reason for steady job gains remains rising oil prices, the report noted that the Biden administration’s announcement to lease out more than 145,000 acres of public land across nine states for drilling has also contributed toward significant job growth in the oil patch.
However, complete recovery of the U.S. labor market largely depends on new projects and expansions.
“Having burnt their fingers in the previous shale boom, many shale creditors are now adopting a more cautious approach before committing to new projects, putting a damper on the expansion plans of many operators,” Rystad noted.
Wage growth outlook
Although the oil price rebound is leading to steady job gains, Rystad’s research shows that wages are unlikely to grow significantly this year.
With operators feeling the impact of inflation on their budgets, wage growth across the industry is expected to be a relatively meager 2.9% in 2022. Operators in Midland, Texas have been battling an inflation of about 10% for the past six months, which according to Moody's Analytics, is well above the national average.
But Rystad projects that workers will see double digit wage growth by 2024 due to the shrinking talent pool.
Young graduates are hesitant to enter the oil and gas business and are opting for renewables instead. Based on figures from the end of 2021, the oil and gas industry requires an additional 8,000 petroleum engineers to capitalize on the current high oil prices.
The lack of highly skilled labor combined with high inflation and an increasingly demanding workforce in terms of better working conditions, flexible hours and perks is expected to bring in higher pay for oil and gas workers between 2022 and 2027, according to Rystad.
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