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 Corp 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.
Photo: AFP
“With the lower investment, we anticipate reducing our employee workforce by 6,000 to 7,000,” Chevron chairman and chief executive 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 US$115 just over a year ago to under US$50 last month, causing woes across a once booming industry. Cheaper energy prices fueled a 64 percent drop in third-quarter profit at Chevron, the US’ second-largest oil company.
Earlier this week, Royal Dutch Shell PLC announced a US$8 billion loss, caused in part by lower energy prices.
John Challenger, chief executive officer of outplacement firm Challenger, Gray & Christmas Inc, called the conditions in the oil industry “a little bit of a perfect storm” and predicted more jobs 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,” he said, adding that the impact of a slowing Chinese economy could be even worse as it spreads to other economies.
“We saw a big round of layoffs at the beginning of the year; entering into round two might signal that conditions haven’t improved and further consolidation is necessary,” Challenger said.
“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.”
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