Over the last few years, the prospect of AI integration has taken the oil and gas industry by storm but while this may benefit oil and gas executives and shareholders, it likely is bad news for the average worker. Major oil and gas companies have announced plans to integrate AI across their supply chains from analyzing monitoring data to generating priority lists for site visits. Oilfield Witness has already begun documenting the significant, and often unreported, emissions associated with the data centers necessary for the AI revolution, but the impact of these innovations, particularly in the oil and gas sector, must also be evaluated within a broader industry push towards a leaner workforce driven by industry consolidation and increasing focus on automation of worker responsibilities.
Source: Federal Reserve Bank of St Louis
Well before AI became a hot topic, oil and gas companies were looking for opportunities to cut costs and by extension shrink staff. Automation of field operations was an obvious opportunity to make that change. Automation also provided a potential opportunity for operators to claim emissions reductions by cutting down on downtime for workers to personally respond to problems. In the words of Terry Spencer, former President and CEO of ONEOK, a major natural gas infrastructure company, “One of these days one of these big ol’ fracs will be operated with nobody there”. While we have not gotten to a workerless oil industry yet, employment in the industry is lower now than it was a decade ago despite all-time high production.
One of the pioneers of this age of automation in Texas was BP. BP uses an oil well system that is structured around large central processing facilities. Where most companies have surface equipment and storage at each well, BP strategically sited their central processing facilities so that oil and gas can flow directly from their wells to the facilities, this minimizes the equipment necessary to install at each individual well, which allows a smaller team to monitor more wells. The facilities themselves are also advertised as being highly automated to shorten response times to problems. While BP did not explicitly state that this infrastructure investment was designed to downsize the workforce, the multibillion dollar multi-year investment was accompanied by multiple rounds of layoffs and a hiring freeze. Now, as this infrastructure investment is coming to a close, BP is announcing new efforts to integrate AI. BP is working with Peter Thiel’s AI company Palantir to “embed data engineers to optimize processes…to reduce costs.” The net effect of these changes has been significant. Employee exits have risen by nearly 50% since 2022. BP is far from alone in these trends.
Last year Shell announced they were laying off 20% of their oil and gas exploration workforce aiming to “create more value” through “simplification.” When Chevron acquired Hess Corp last year they laid off over 500 Hess employees in Texas and 20% of their own workforce. Even as production has skyrocketed in the United States, employment in the oil and gas industry has shrunk, down 25% from a decade ago and is expected to continue to fall. Between a weaker gas market, AI integration, automated infrastructure and industry consolidation, the oil and gas industry is poised to continue to lay off employees.
It may be surprising to see Oilfield Witness writing about oil and gas worker employment, when our organization is directly opposed to the continued expansion of oil and gas production. However, labor rights advocacy has been tightly interwoven with climate advocacy for decades. In fact, Oilfield Witness has worked with oilfield truckers to compel shipping companies to follow worker safety regulations.
One of the most persistent labor questions that climate policy has had to grapple with is what to do with the people currently working in the oil and gas industry. While industry leadership has been directly involved in the perpetuating of lies about climate change that have slowed the uptake of renewables and lined their pockets, the vast majority of employees in the oil and gas industry are normal people who are working to feed themselves and their families many of whom are understandably wary of climate policies that could potentially put them out of a job. No one wants to be responsible for people losing their jobs (except apparently industry shareholders), so climate advocates have dedicated significant thought to how to address this problem.
You may have heard climate advocates use the words “just transition”. Like many activist phrases, the phrase means different things to different people, but the general goal of a just transition is to figure out a policy solution to make sure that a transition to renewables does not leave people unemployed or disadvantaged. The exact details of the just transition are an ongoing discussion. Though the concept predates him, Tony Mazzuchi coined the term just transition. In the 1990s, he proposed that the federal government develop a Superfund for Workers, drawing on the superfund concept that is currently used to fund the clean up of polluted land throughout the country. Even at 30 years old, his proposal is a fascinating read. Other advocates have proposed their own versions of the concept from a Universal Basic Income to training oilfield workers to plug abandoned wells to investments in education to bolster capacity for the engineering jobs that renewables will create. Most advocates involved in the just transition agree that it will require a portfolio of policies adapted to each country’s individual needs rather than a singular panacea. The concept has gained enough momentum that it has actually been included in the United Nations Climate Change Conference (COP) reports since 2015. The one thing that has bound all of these efforts together has been a consistent determination from climate advocates to avoid forcing people out of their jobs.
Anxiety from both oil field workers and climate advocates about the livelihoods of those involved in the oil industry has created political opportunities for lobbyists. The welfare of the industry’s employees has been utilized as a political cudgel for years. Most new environmental regulations have elicited cries from industry leaders that they will lead to huge job losses. For example, in 2021, the American Petroleum Institute responded to proposed restrictions on drilling on federal land by saying that the rules would risk “hundreds of thousands of jobs. This month, the Texas Oil and Gas Association argued that without easier permitting rules for new oil and gas wells, the industry would lose jobs. Even the White House has claimed that the industry is responsible for “millions of good-paying jobs” and that we need deregulation to maintain and expand that employment. It is not clear where that number originates given that federal employment data estimates the industry to employ fewer than a million people. Though studies have shown that the increased economic production in oil and gas towns does not translate to more jobs or higher local incomes, presenting the industry as a job creator is central to oil and gas marketing.
With so much posturing about protecting industry jobs one would think that maintaining the industry workforce that does exist would be a massive priority. Instead, what we have seen is an industry that is laying off employees while reporting record production. Last month BP announced yet another round of layoffs. It also announced new shareholder dividends and a several hundred million dollar stock buyback. Last year Exxon laid off 400 workers in Texas, and distributed $36 billion in stock buybacks and shareholder dividends (making it one of the biggest buybacks of the year conducted by a nontech company). This year ConocoPhillips is laying off 20-25% of its staff. It is also in the process of celebrating a better than projected 2024 with $4 billion in dividends to shareholders, a $6 billion stock buyback and a $22.5 billion acquisition of Marathon Oil. Chevron is laying off 20% of its staff this year, but is planning $13 billion in buybacks. Civitas announced it would be laying off 10% of its staff in the interest of maintaining a “disciplined posture”; that posture apparently includes accelerating $750 million in stock buybacks. Unsurprisingly for publicly traded companies, the shareholders come first.
The oil and gas industry has been incredibly effective at convincing the world that the fight over renewable energy is a battle between economic prosperity and environmentalism, jobs or health. I think that many people are cognizant that the oil and gas industry, like any other industry, is most loyal to its bottom line. However, the industry has kept up the pretense that its real concern is the interest of its workers. Recently, we’ve seen that mask start to crack.
The industry has stopped pretending that it cares about its workers as it finds more and more ways to replace them. In many ways this is a predictable outcome. Lower costs make higher margins and more profits, but I’ve been bothered by this in particular in the oil and gas industry because of how much ink has been spilled in the righteous defence of industry workers by lobbyists. We have arrived at a bizarre inversion where it feels like climate advocates with all of their consternation about the just transition care more about oil and gas workers than the oil and gas industry does. There is still work to be done to refine and perfect the just transition concept, but it has been a failure for climate advocates that more oil and gas workers are not aware of it. I hope that can change.
