Oil & Gas News

Oklahoma Has an Energy Employment Crisis

Oklahoma, Energy

While Oklahoma trails only Texas in oil and gas employment, its energy sector has grappled with the most pronounced job losses nationwide, as highlighted by a recent report from the OKC Branch of the Federal Reserve Bank.

Drivers Behind the Downturn

Several factors contribute to Oklahoma’s pronounced job losses:

  • Natural Gas Dominance: Oklahoma’s energy landscape is heavily tilted towards natural gas, which hasn’t been as profitable in recent years.
  • Corporate Consolidations: Mergers have led to significant cuts, particularly in urban hubs like Oklahoma City and Tulsa.
  • Technological Advancements: Modern drilling and production methods require fewer hands on deck.

Though there’s potential for Oklahoma to benefit from increasing global demands for liquefied natural gas, the report casts doubt on whether the declining employment trend can be overturned.

Chad Wilkerson, of the Federal Reserve Bank of Kansas City, remarked, “Over the past four years, Oklahoma’s challenges, such as falling gas profitability and slower productivity growth, combined with its significant number of headquarters and office personnel, culminated in a significant reduction in energy employment.”

Deep Dive into the Numbers

Mineral Rights

The Oklahoma Economist, in its recent edition, undertakes a meticulous analysis of the state’s energy production breakdown, drilling efficiency, and employment distribution, aiming to pinpoint the reasons behind these job losses.

Compared to the modest employment shifts in most of Oklahoma’s industries since 2019, two stand out: while warehousing saw a near 20% job surge, the energy sector suffered, losing almost a third of its workforce since August 2019. Nationally, the average energy job loss stands at 11%, with only Colorado’s 22% decline surpassing the U.S. average.

This decline coincided with a period marked by volatility, dwindling sector activity, and plummeting oil and natural gas prices both at the national level and within Oklahoma.

The tumultuous 2020, characterized by weakened petroleum demand due to COVID-19 and exacerbated by production disputes between Saudi Arabia and Russia, further strained the industry. Although there was a price rebound in 2021, following global events such as Russia’s invasion of Ukraine, this upswing was short-lived.

Natural Gas: A Double-Edged Sword for Oklahoma

Oklahoma’s primary reliance on natural gas production, representing 75% of its output, is unparalleled save for Louisiana. While Louisiana’s offshore drilling insulates it from rapid employment fluctuations, Oklahoma, with its land-locked operations, feels the brunt more directly.

A consistently low spot price for natural gas over the past four years, far below profitability benchmarks, has been a pressing concern.

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Challenges with Productivity

Despite technological leaps enhancing national oil and gas productivity, Oklahoma hasn’t kept pace. While the U.S. enjoys robust production rates per rig, the Anadarko Basin, a pivotal region in Oklahoma, lags behind. The difference in productivity gains between Oklahoma and other major basins is stark and a significant contributor to the state’s energy employment woes.

Office Jobs in the Energy Sector: Oklahoma’s Vulnerability

Oklahoma’s unique employment structure, with a whopping 42% of its oil and gas workforce in office roles, leaves it vulnerable. Corporate consolidations and industry mergers, therefore, disproportionately hurt Oklahoma’s job market.

Final Thoughts

The energy sector’s turbulent journey in recent years has left indelible marks on the state. Reduced profitability in natural gas, coupled with lagging productivity and a high concentration of office roles, resulted in substantial job losses. The next chapter for Oklahoma’s energy sector remains unwritten, with possibilities of new natural gas markets and advanced technologies offering a glimmer of hope.

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