It’s been a wild ride in the oil business lately. But some of us have seen the cycle before. So, starting at the bottom of a price cycle, as prices go up, hiring begins with hiring only the best. Then, the cycle moves on to hiring many, to bonuses for staying, retention packages and incentives. This is followed by market contractions involving layoffs and restructuring. Rinse and repeat. If you are old enough, you have seen Exxon become ExxonMobil, peak oil come and go and shale rise, fall and rise again. In all this craziness, one thing keeps happening – people keep using oil.
Maybe, looking at the price of oil over the last seventy years can offer a perspective. This chart (from Macrotrends.net) has prices on a log scale that emphasizes large differences. You can really see the rapid ups and downs starting once OPEC comes on the scene in early 70’s. Supply is threatened and prices spike then fall in the 80’s crash. This was followed by consolidation as prices stabilized. We see the peak oil ‘happy time’ starting in early 2000’s, the next big fall in ‘08 and then again in ‘14 and once more last month. Yes, oil prices and jobs go up and down, and it happens really fast. However, the most important feature of this graph is the width of the valleys which correspond to periods of low oil prices. It’s relatively small, usually months. Those months hurt. Companies go under. Some of us leave the industry. But the industry always comes back.
Why? The simple answer is that oil has a high net return on energy investment and that energy has been essential in growing the world’s standard of living.
Yes, we are in transition, on a global scale, away from carbon-based fuels. We will gradually see demand sink over the next several decades, from about 90 million barrels a day, as we make our global energy transition. In part, this declining demand will be balanced by the natural decline of the 1500 large reservoirs that constitute 95% of the easy oil still pumping. But, for the next several decades, we will keep pumping, so try and remember these low oil prices will pass into memory soon.