With the price of oil tumbling below $42 per barrel in mid-August, and still sitting below $45 per barrel at the end of September, oil companies are continuing to struggle. Now, at least one expert is forecasting that prices could go as low as $15 per barrel before the balance of supply and demand shifts back in Big Oil’s favor.
Why are the Oil Companies Struggling?
Last summer, oil was trading at around $100 per barrel. This translated to a pump gas price of around $3.50. The current average gas price is $2.66. If the price of crude really does drop to $15, we may see gas prices we haven’t seen since 1999.
Part of the problem is that – at least for now – there is just too much oil. With the Recession in the United States, and now economic struggles in China, the high demand that led to the record high of $147 per barrel in 2008 simply isn’t there. Yet, the OPEC nations – including Saudi Arabia – are continuing to produce more than enough oil. This is because they can sell at much lower prices than the private oil companies and still turn a profit.
All of this translates to big budget cuts within Big Oil. Already this year, we have seen major staffing reductions at Exxon, Chevron and Shell. Now, Halliburton is executing layoffs as well. In February, the world’s second largest provider of oilfield services announced it would be cutting up to 6,400 jobs as a direct result of the drop in oil prices. In September, Halliburton confirmed a recent round of layoffs, though it is unclear whether this was part of the February plan.
The current economic conditions are even driving some oil companies to bankruptcy. In July, Afren – a global oil exploration and production company with offices in Houston, TX – announced that it would be seeking administration in Europe. A September article from Maritime Executive points to similar filings and attempts to restructure at offshore drilling companies, including:
- Samson Resources
- Paragon Offshore
- Vantage Drilling
The article also notes that Transocean – the owner of the Deepwater Horizon offshore drilling rig that exploded in 2010 – may be looking to acquire these businesses for pennies on the dollar.
What Does All of This Mean for Offshore Workers?
While all of this translates to lower prices at the pump – at least for now – it also means that offshore workers are facing new and heightened risks on a daily basis. When oil and drilling companies cut staff, the employees who remain are often asked to do more with less. Industry experts also cite reductions in safety measures and aging rigs as serious concerns that may lead to more oilfield and offshore injuries. More work with less rest, a reduced emphasis on safety and deteriorating equipment spell a recipe for danger. Unfortunately, when oil companies lose money, it is often their employees who pay the greatest price.
Morrow & Sheppard LLP | Houston Offshore Injury Lawyers
The attorneys at Morrow & Sheppard LLP represent offshore workers who have been injured in the Gulf of Mexico and families who have lost loved ones working offshore. If you think you may have a case against an oil company or offshore drilling company, we encourage you to contact us today for a free consultation.