August 11, 2017 Read More →

On the Blogs: The Oil Sector Has a Jobs Problem Too

ThinkProgress:

After six months of regulatory rollback, Trump has done almost nothing that will create jobs on oil fields or offshore rigs. That’s because low oil prices, not environmental protections, are stunting job growth, and Trump’s push to nix federal regulations and expand drilling will only make oil cheaper.

Foreign producers have flooded the market, driving down the price of crude oil. Oil giants like Exxon have seen earnings drop off as a result. In an effort to cut costs and salvage profits, oil companies are laying off workers or automating operations, replacing workers with machines. Drilling rigs have gotten more efficient, allowing companies to pump the same volume of oil with half as much equipment and far fewer workers. Automation is creating a small number of high-tech jobs for skilled workers, but it’s eliminating the well-paid blue collar jobs Trump promised to deliver.

“When the inputs to a business get cheaper, that causes the business to expand, increasing employment,” said Mark Jacobsen, professor of economics at UC San Diego. “From the perspective of a U.S. oil producer, input costs haven’t changed much, but the output they produce is [now] worth very little. This causes the business to shrink, decreasing employment.”

Even if the price of oil rebounds, it likely won’t do so permanently. Electric vehicles are getting cheaper every day, and sales numbers for EVs are growing by leaps and bounds. Over the next few years, this will likely stunt demand for gas, leading to an oversupply of oil and a further downturn in prices, according to analysis from Bloomberg. And the situation isn’t likely to change, considering the United Kingdom, France, and Norway have all passed laws banning the sale of fossil fuel-powered cars by 2040 or, in the case of Norway, 2025. Other countries are likely to follow suit.

Technology and economics, not environmental protections, are driving the loss of jobs. There is very little that this president  — or any president  — can do about it.

Currently, the price of oil is simply too low to justify expanding production. The controversial Keystone XL pipeline offers a case in point. In the years since opponents first took up arms against the project, the price of oil has plummeted. Now, companies are backing away from the Canadian tar sands, which are difficult and costly to drill. Despite having the backing of the Trump administration, the project may ultimately go nowhere.

All of this throws a wrench into Trump’s $1 trillion infrastructure plan, which he promised would be paid for by the tax revenue from fossil fuel production. As InsideClimate News reported, to raise that much revenue, the federal government would have to dramatically raise taxes on oil or oil prices would have to skyrocket. Neither is likely to happen under the current administration.

If the president wants invigorate the energy sector, he might look to renewable energy sources. Solar jobs are growing 17 times faster than the economy as a whole, while wind technician is the fastest-growing job in the country. These are blue-collar jobs that don’t require a college degree and can’t be automated or outsourced. Trump could use his office to spur the growth of these fields.

“Continued investment in research and development could bring down the costs of clean-energy inputs even further, continuing to help the sector,” Jacobsen said. “Government commitment to improve air quality can also help the clean-energy sector, since it makes the costs faced by their competition higher.”

It may sound paradoxical that low oil prices would stunt job growth in the oil sector, while low prices for wind and solar would create jobs in the clean-energy sector. That’s because oil prices are being suppressed by glut of supply, which forces companies to lay off workers to remain profitable. The cost of renewables is falling thanks to technological advances, making the product more attractive to consumers.

“If oil prices are low, the oil industry has to curb its activities. That translates into job losses,” said Karl Cates, a spokesperson for the Institute for Energy Economics and Financial Analysis. “Low prices for solar and wind are good for employment in the clean-energy sector because they drive deployment. Renewables represent an emerging sector that has huge cost advantages. It’s growing because it’s cheaper.”

Trump likely won’t change course on energy policy. Too bad. He has the opportunity to create jobs “big league.”

More: Trump’s backwards effort to bring back oil jobs

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