Oil Price Slide May Cost 142,000 Jobs in ‘86, Industry Study Says

The slide in oil prices probably will wipe out 142,000 oil industry jobs by the end of this year and almost as many among supplier companies, the industry’s largest trade group said Tuesday.

Jobs among suppliers ranging from machinery and steel manufacturers to advertising agencies probably will fall by 116,000, the American Petroleum Institute said.

A price of $15 a barrel would, by 1991, mean the end of almost 300,000 jobs from the 1.6 million provided by the industry in 1985, according to API figures. A $10-per-barrel price would eliminate 407,000 jobs, the institute said. These projections do not include jobs in supplier firms.

Oil prices averaged about $28 a barrel in the United States last year, according to the institute. On the New York Mercantile Exchange, contracts for August delivery of West Texas crude recently have been running at about $13 after rebounding from about $10.

The institute presented a new study, based on a survey of 21 large member companies, which projected U.S. production in 1991 at 6.2 million barrels per day if the price is $15 a barrel and 5.1 million barrels at $10. Last year’s production was 8.9 million barrels, a figure that would rise to 9.1 million barrels if the price remained at $28, the institute said.

This means that imports would rise from about one-third of U.S. consumption now to more than 50% under either price scenario, API President Charles DiBona told a news conference.

The institute study repeated earlier recommendations for accelerated leasing of the outer continental shelf, retention of favorable tax treatment for oil industry investments, removal of restrictions on the use of natural gas as a boiler fuel and continued purchases of crude oil for the Strategic Petroleum Reserve.

It also repeated earlier predictions of price increases after three to five years when world oil use, spurred by low prices, stimulates production from members of the Organization of Petroleum Exporting Countries to 80% of capacity. This is the point at which the cartel has been able to dictate prices in the past, the institute said.

Each $1-billion reduction in exploration and production capital expenditures reduces direct industry jobs by almost 11,000 and indirect jobs among suppliers by 8,900, the API estimated on the basis of a Commerce Department computer model of the U.S. economy.

The job loss estimates of 142,000 and 116,000 were two-year declines based on an estimated cut of $13 billion in 1986 capital spending from 1984 levels, as reported by the Oil & Gas Journal.

In a related development Tuesday, the price of West Texas Intermediate crude for August delivery skidded by $2.02 a barrel to $11.07 on the New York Mercantile Exchange amid growing evidence that OPEC is unlikely to reach an accord to curb production and reduce the global oil surplus at its meeting next week.

The Gulf News, an English-language newspaper in Dubai, said the refusal of independent producers to cooperate with the cartel in stabilizing the oil market would make it difficult for OPEC to agree on new output quotas at its July 28 summit in Geneva.

Analysts said traders bailed out of the August crude contract, which expired Tuesday, when it became apparent that the recent technical rally on the Merc was spurred by speculators and could not be sustained in face of the continuing glut. Feverish buying had pushed the crude above the $13 mark Monday.