[A]fter a roughly 50% plunge in oil prices, exploration and production companies are cutting capital budgets, service companies are weighing layoffs and nonenergy firms that popped up to support the industry are bracing for a protracted slowdown.
One company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren’t renewing contracts for its offshore drilling rigs in the Gulf of Mexico while crude prices are depressed.
“It’s been breathtaking,” said Jim Noe, executive vice president of Hercules, which was founded in 2004. “We’ve never seen this glut of supply and dislocation in oil markets. So we’re not surprised to see a significant decline in demand for our services.”
The bust in this sector is going to be as spectacular as the boom was. Employment jumped by almost 50% to more than 779,000 jobs from the end of the recession through October, compared with a 7% gain across all job sectors, according to Labor Department data.
verage earnings for workers in oil and gas extraction climbed nearly 23% to more than $1,700 a week over that period. That compares with a 13% increase to $848 for all workers.
The bust will only be a blip for the overall US economy, but this is not the time to buy real estate in places like Wyoming and North Dakota.