When oil prices dropped below $50 per barrel earlier this year, market analysts predicted the shutdown of significant numbers of oil rigs in the Gulf of Mexico and in other drilling areas around the United States. Their predictions quickly proved correct, as Baker Hughes, CNN and other outlets reported oil rig closings by the scores in January. As reported by the Institute for Energy Research, Helmerich & Payne alone planned to shut down a total of 61 rigs – reducing its drilling volume by 20 percent.
The Public Impact of Reduced Drilling Activity: Reduced Prices and Job Losses
While many of us have been waiting for the relief of lower prices at the pump, this isn’t the only real-life impact of plummeting oil prices. With hundreds of oil rig closings come thousands of job losses. For example, by the end of January, Schlumberger had already laid off 9,000 employees. By June, analysts and industry insiders predict that oil rig closures will result in as many as 20,000 job losses nationwide.
The slowdown in drilling activity is having the greatest impact right here in Texas. While we experienced an economic boom with the spike in crude prices over the past several years, now that prices are down, JPMorgan Chase’s chief U.S. economist has forecasted a possible regional recession if the industry does not bounce back quicker than expected.
There is another potentially-alarming impact of oil rig closures as well.
The Hidden Impact of Reduced Drilling Activity: Cutting Costs May Lead to More Oil Rig Accidents
Of course, not all of the oil rigs are closed. But, with such high volumes of layoffs and executives placing increased scrutiny on the bottom line, does this put the workers who are still out there at greater risk of being seriously injured or killed in an accident? Consider:
- With oil prices hovering above where they are today, a 2010 report from the Washington Post found that oil rig workers were frequently being asked to work with little sleep, and often with inadequate training. The article cited investigations conducted by the Minerals Management Service (MMS) of the federal Bureau of Ocean Energy Management, Regulation and Enforcement, which stated that these stressful working conditions played a “significant role” in the rising numbers of injurious and fatal accidents happening in the Gulf.
- Providing proper training and maintaining compliance with government safety regulations are expensive. They also take time – time that is not spent working out on the rigs.
- MMS statistics also show that accident reports actually increased during the boom years between 2006 and 2009. It was in 2006 that a revised definition of “accident” was implemented in order to help crack down on safety issues on rigs at sea.
If the oil companies are scrambling to cut costs, what expenses will they spare to protect the bottom line?
The Reverse Effect: When It is Time to Drill Baby Drill
The Economics of Supply and Demand
As we approach the summer months, oil prices are slowly beginning to rise. However, hovering under $60 per barrel, they are nowhere near 2014’s $93 average – and not even sniffing the historic peak of $147 per barrel we saw in 2008.
Despite the consumer-friendly prices and decreased drilling, domestic oil production is still expected to grow in 2015 and beyond. The reasons are two-fold:
First, the wells that were drilled before the widespread rig shutdowns are continuing to produce. This is a fresh supply of crude that will hit the market and continue to feed our cars, planes, homes, and the thousands upon thousands of products that rely upon oil to make their way to the shelves. The oil companies may have slowed their drilling, but they haven’t slowed their production.
Second, remember the basic theory of supply and demand. Right now, we have lower fuel prices. In the short term, these lower prices are great for consumers, but they also mean that the oil companies’ profits are not where they want them to be. When the oil companies are not making as much money as they would like (like right now), they decrease production in order to cut costs. Eventually, the wells that we are relying on today will stop producing. When they do, where is the oil going to come from? Way back in early 2015 the oil companies stopped drilling because they weren’t making enough money, remember?
When the supply drops, demand increases. When demand increases, prices increase – and then the oil companies are happy again and back to their old drilling ways.
Will the Oil Companies Compromise Safety in Order to Drill?
When the oil companies scramble to ramp up production as economic conditions swing back in their favor, this will be another time when workers need to be extremely cautious about oil rig accidents. As the rigs reopen, thousands of previously out-of-work men and women will be flooding the rigs to meet the oil companies’ production schedules. With new workers working long hours under dangerous conditions with inadequate training, the risks for everyone on board the rigs will intensify. New and aging rigs alike make also be lacking in adequately-maintained safety equipment, and may not have fully-updated procedures.
As experienced oil rig injury attorneys, we view both the short-term and long-term economic forecasts as significant concerns for the health and safety of rig workers off the coast of Texas and elsewhere in the Gulf. We have successfully represented hundreds of individuals who have suffered injuries working offshore. We know the trends, and we know what to look for when it comes to the causes of oil rig accidents. Your safety should be your employer’s first priority. When it’s not, we are here to help you hold them accountable.
Contact Zehl & Associates for More Information
Zehl & Associates provides experienced and aggressive representation for workers and families of workers who have suffered injuries in offshore drilling accidents. If you think you may have a case, we want to hear from you. One of our trial lawyers will be happy to sit down with you for a free consultation. To learn more, call (888) 603-3636 or contact us online today.