The plummeting price of oil has ripped into the once booming US energy industry so dramatically that the oil sector has laid off 87,000 people so far this year.
Chevron became the latest company to dismiss workers on Friday, announcing that it would lose between 6,000 and 7,000 jobs – the second four-figure round of dismissals at the company since July.
The company is cutting investment by a fourth. “With the lower investment, we anticipate reducing our employee workforce by 6,000-7,000,” the chairman and CEO, John Watson, said in a statement.
Watson said the company was “focused on improving results by changing outcomes within our control.”.
Oil prices have fallen from $115 just over a year ago to under $50 this month causing woes across a once-booming industry. Cheaper energy prices fuelled a 64% drop in third-quarter profit at Chevron, the US’s second-biggest oil company behind Exxon Mobil. Earlier this week Royal Dutch Shell announced an $8bn loss, caused in part by lower energy prices.
John Challenger, CEO of outplacement firm Challenger, Gray & Christmas, called the conditions in the oil industry “a little bit of a perfect storm” and predicted more job losses to come.
“It’s not only the falling price of oil and the oversupply of oil, but it’s also the falling demand for oil in China and in other parts of the US,” Challenger said. “China’s growth is just slowing and we really don’t know how much it’s slowing.”
Oversupply has contributed to the carnage by eating away at profit margins are thinner, he said. But the impact of a slowing Chinese economy could be even worse as it spreads to other economies, he said.
“We saw a big round of layoffs at the beginning of the year; entering into round two may signal that conditions haven’t improved and further consolidation is necessary. Chevron and undoubtedly other companies are facing similar conditions where their workforce conditions aren’t consonant with their business level,” he said.
“I think Chevron is a sign that this is going to last longer than optimists had hoped. They’ve assessed conditions and it’s been going on for a longer period of time and they need to adapt.”
This article was written by Sam Thielman in New York, for theguardian.com on Friday 30th October 2015 19.24 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010