Prediction of changes in U.S. oil and gas industry

The spring engineering career fair will be met with immense anticipation by all engineering students and we are hoping for the best; however, oil prices hitting the lowest in five years has instilled fears in the minds of the students.

It is both an inside joke and subject of serious literature among petroleum evaluation engineers to forecast the oil and gas prices with certainty. The oil barrel price plummet can make the students pay a huge price, even more so for petroleum engineering students who will graduate in 2015 looking for full-time opportunities.

Not only are job options cut for students, but the oil field service companies are laying off employees in huge numbers, and it is taking a toll on families earning from the oil industry.

According to the Houston Business Journal, Houston is currently experiencing a setback in the oil and gas sector. But the other industries, like automobiles, transport and construction, are expected to flourish, though the diverse economy might slow down.

The catalyst for the world-wide oil price drop is complex. The oil and gas industry is more than 150 years old and is growing tremendously each day with new forms of technology.

The shale boom in the United States has added to its energy independence, with its production increasing every year and growth seemingly ceaseless. As Bloomberg reported, it wasn’t until recently that the OPEC nations decided to suppress this burgeoning industry by not cutting back on production in an overly supplied market.

This resulted in the plunging oil price, forcing U.S. shale oil producers to panic.

“Stocks of the oil majors like Exxon and Shell might seem to fall, but they are still in good positions within the market,” said petroleum engineering graduate student Thitaree Lertliangchai, who said he studies stock prices every day. “It will tend to affect smaller companies more.”

It’s similar to when the oil prices collapsed to below $10 in 1986, and oil-producing states as Texas, Louisiana, North Dakota, Wyoming and Oklahoma faced the brunt of it. Employment fell by 1.1 percent in Texas, according to U.S. Bureau of Labor Statistics.

Chemical engineering student and equity analyst at Roth Capital Partners Rishabh Sharma said this happened because “the Arabs had flooded the market in 1986 to eliminate competition as former Soviet Union and regain its hold.”

“But the bright side to this is that the oil prices and the U.S. dollar have shown an inverse relationship for the past decade,” Sharma said. “The current prices allow people to purchase cheaper gasoline at pump stations, which means increased consumption of other products. A fall in crude oil prices have reduced the U.S. current account trade deficit. The U.S. government can take advantage of this money to create more jobs and propel its growth.”

By an optimistic viewpoint, the huge number of layoffs might open vacancies in the near future when oil price stabilize.

Petroleum engineering graduate student Ronald Bickman said he believes job cuts will occur more for onshore operations than offshore.

“The deep-water operations in Gulf of Mexico are less likely to be affected, partly because they require more specialized skills,” Bickman said. “It is natural for companies to slash jobs when they cannot afford them in this economy, but the reverse occurs as well. They will over hire to recover when the demand increases.”

Companies function based on profit and loss rather than hires and fires, which implies that a stable market will require skilled workforce later. The shift will be gradual from the heavy-earning, highly-experienced experts to young, talented graduates bracing themselves for their first big break.

Job-seeking students will have to remain patient and keep calm in coming months.

Opinion columnist Aishwarya Gogoi is a petroleum engineering graduate student and may be reached at [email protected].

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