"Dirty, Difficult, And Dangerous": Why Millennials Won't Work In Oil

Authored by Tsvetana Paraskova via OilPrice.com,

Like many industries today, the oil industry is trying to sell its many job opportunities to the fastest growing portion of the global workforce: Millennials. But unlike any other industry, oil and gas is facing more challenges in persuading the environmentally-conscious Millennials that oil is “cool”.  

During the Super Bowl earlier this year, the American Petroleum Institute (API) launched an ad geared toward Millennials, who now make up the largest generation in the U.S. labor force.   

“This ain’t your daddy’s oil”, the ad says, in what API described as “a modern look at how oil is integrated into products consumers use now and in the future supported by bold visuals.”  

Despite its pitch to speak the Millennials’ language and reach out to the elusive generation, the ad sparked anger with many consumers and viewers.

Millennials continue to have the most negative opinion toward the oil industry compared to all other industries, and they don’t see a career in oil and gas as their top choice of a workplace. The oil industry’s talent scouting and recruiting methods of the past are failing to reach Millennials, who want their work to have a positive impact on society, various studies and polls have found—a rather big ask for the oil industry.

This failure to reach the group that makes up the largest portion of today’s workforce—which now surpasses Generation X—points to a huge problem for the oil sector, as Baby Boomers move into retirement in droves.

Not only are Millennials snubbing oil and gas because of its negative image, they also seek different job perks than previous generations sought, and in this regard, the oil industry will need to do more as it becomes increasingly obvious that Millennials want different things than what oil executives think they want. 

A total of 14 percent of Millennials say they would not want to work in the oil and gas industry because of its negative image—the highest percentage of any industry, McKinsey said in September 2016.

Young people see the industry as dirty, difficult, and dangerous, according to an EY survey published last month. EY’s survey polled Millennials—the 20-to-35-year-olds today—as well as Generation Z coming after them, and found that younger generations “question the longevity of the industry as they view natural gas and oil as their parents’ fuels. Further, they primarily see the industry’s careers as unstable, blue-collar, difficult, dangerous and harmful to society.”

In addition, two out of three teens believe the oil and gas industry causes problems rather than solves them, the survey showed.

So ‘not your daddy’s oil’ is not sinking in with Millennials and Generation Z, and with many of them, it never will, despite the oil lobbies’ marketing efforts to try to make it sound like an attractive career path.

According to executives polled by EY, the top three drivers for young people would be salary (72 percent), opportunity to use the latest technology (43 percent), and a good work-life balance (38 percent). But young people—although they are also prioritizing salary—have other views on what they look for in a job. Salary is still the top priority at 56 percent, but a close second comes good work-life balance (49 percent), with job stability and on-the-job happiness equally important at 37 percent.

Executives are underestimating the importance of work-life balance and stability for Millennials, while overestimating the allure of technology as a factor. It’s not surprising that Millennials are not as attracted to the opportunity to use new tech as oil executives believe they are – Millennials generally don’t see technology as a perk, they take it for granted.

Moreover, Millennials don’t see the oil and gas industry as innovative – a major driver of career choice among this generation. According to a recent report by Accenture, “Despite evidence to the contrary, many Millennials believe the sector is lacking innovation, agility and creativity, as well as opportunities to engage in meaningful work. In fact, only 2 percent of U.S. college graduates consider the oil and gas industry their top choice for employment.”

Accenture is warning that ‘the talent well has run dry’ and said:

“We believe the growing workforce deficit will, in fact, be a greater barrier to oil and gas companies’ upturn success than any deficits that might exist in capital, equipment or supplies.”  

The oil   and gas industry is losing the competition for talent recruitment to industries that are more appealing to Millennials, and U.S. oil and gas firms will face the talent crunch first, according to Accenture.

“Any mature industry has to think about the fact that there’s a new sheriff in town with new values, new spending habits,” Jeff Fromm, an expert in marketing to American Millennials, told Bloomberg.

And if the oil and gas industry wants to get this ‘new sheriff in town’ on board, it needs to profoundly change recruitment strategies and talent sourcing. But with the negative image that is probably set to become even more negative—despite oil organizations’ marketing efforts—oil and gas has a huge workforce problem looming.

Worst Hurricane Season In A Decade Threatens Gulf Coast Production

Authored by Nick Cunningham via OilPrice.com,

2017 could be an “above-normal” year for large hurricanes, according to the National Oceanic and Atmospheric Administration (NOAA), a potential problem for Gulf Coast oil drillers and refiners.

NOAA puts the odds of an “above-normal” season for hurricanes at 45 percent, while the chances of a normal and below-normal season are at 35 and 20 percent, respectively. In fact, they said that there is a 70 percent likelihood of 11 to 17 named storms, which are storms that have 39 mile-per-hour winds or higher. About 5 to 9 of those could become hurricanes (winds of 74 mph or higher); 2 to 4 of which could become major hurricanes (winds of 111 mph or higher). The average season (which runs from June through November) tends to have just 12 named storms, so the potential for 17 named storms puts the 2017 hurricane season in more treacherous territory.

"We"re expecting a lot of storms this season," Gerry Bell, lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center, told reporters. "Whether it"s above normal or near normal, that"s a lot of hurricanes."

Part of the reason for the expected uptick in hurricane activity is because the El Nino phenomenon is not expected to show up. El Ninos tend to suppress hurricanes. Also, sea-surface temperatures are above-average, which contributes to stronger storms.

There has been a decade-long lull in major hurricanes that have struck the U.S., but there is a growing probability that that changes this year.

That should be cause for concern for the oil and gas industry, much of which is located along the Gulf Coast. They have been spared the worst that Mother Nature has to offer for quite some time.

In 2005, Hurricanes Katrina and Rita, which struck the Gulf Coast within a couple of weeks of each other, destroyed 115 oil platforms and damaged 52 others, leading to the “near total shut-down of the Gulf’s offshore oil and gas production,” according to the Bureau of Safety and Environmental Enforcement. While the effects were mostly temporary, nine months later as much as 22 percent of oil production and 13 percent of gas production in federal waters remained offline.

WTI oil prices jumped more than 20 percent within a few weeks because of the outages, from $57 in mid-July to $69 per barrel on September 1, several days after the storm made landfall.

The industry is much better prepared these days than it was then, with improved standards on new rigs and much better processes for evacuation and subsequent return to production. Today’s rigs can withstand higher waves and stronger winds. They also can position themselves using GPS rather than being moored to the seafloor. Storm prediction is also vastly improved. As such, even a major hurricane on the scale of Katrina is unlikely to be as damaging as it was in 2005.

Still, outages can still occur, taking crude oil production and refining offline. The averaged named storm can slash output in the Gulf by an average of 169,000 bpd month-on-month, according to BTU Analytics. Much of that tends to come back online quickly, but that isn’t guaranteed. “It takes more than a flip of a switch to get a refinery back up and running,” the American Petroleum Institute says, and pipelines cannot operate if they do not have power.

Moreover, there have been few test cases since the disaster of 2005. In 2008, an estimated 60 oil and gas platforms were destroyed from Hurricanes Ike and Gustav. A slow-moving Hurricane Isaac in 2012 destroyed some onshore storage facilities. Other than that, there have only been relatively manageable storms. The outcome from a Category 5 storm is uncertain.

But one other factor working in the industry’s favor is that there just aren’t as many rigs deployed in the Gulf as there was ten years ago. The U.S. offshore rig count stands at 23 as of mid-May, down from over 100 back in 2005-2007.

(Click to enlarge)

Given the state of the oil market today, even a major hurricane might not be enough to really move the needle all that much on oil prices. Inventories are still sky-high, and many analysts are expecting only modest increases in prices this year, with questions still lingering about a possible glut in 2018. However, the warning from NOAA that hurricane season could be much more active this year bears watching.

Here's Why You'll Pay Higher Gas Prices Whatever The Market

Authored by Irina Slav via OilPrice.com,

The average gasoline tax in the U.S. is 49.5 cents per gallon, according to data from the American Petroleum Institute. That’s not too bad as far as averages go, but it has been climbing over the last five years and it will continue rising as states lose hope that the federal government will chip in for infrastructure construction and maintenance, and transportation.

Washington has been wary of raising the federal fuel tax. So wary, in fact, that the last time it adjusted the rate was more than two decades ago. Meanwhile, international oil prices have been jumping up and down, cars have become much more fuel efficient, and inflation has been biting into state income from gas taxes. In addition, there is a whole new challenge in the shape of electric vehicles that in the future will increasingly undermine fuel sales income for states.

Left with no options, 22 states have raised their fuel tax since 2012 and more will likely resort to the unpopular measure in the coming years. Since January 2017, Governing magazine notes, three states have passed laws to increase the gas excise tax: California, Tennessee, and Indiana. In California, the total tax, state plus federal, is now 57.20 cents per gallon. In Tennessee, the figure is 39.80 cents. In Indiana, the overall tax consumers pay on a gallon of gas is 51.24 cents.

According to one research organization, the Institute on Taxation and Economic Policy, the number of states that have already introduced higher gas taxes is unusual, and what’s more, this number will continue to rise, with another seven states likely to pass higher gas tax laws before the end of the year: Alaska, Louisiana, Wisconsin, South Carolina, Oregon, and Oklahoma, and West Virginia. Why? Because, although taxpayers can hardly be too happy about it, business groups are backing the higher taxes, ITEP analyst Carl Davies.

It’s a simple truth, though not a widely liked one, that states—and national governments—need income from taxes to produce goods and services for the people who pay the taxes. While it’s true that in the last decade there have been good reasons to keep prices at the pump steadily taxed, now that demand for road infrastructure and transport services is growing, states are finding themselves short of the money needed to respond to this demand.

The Great Recession saw prices shoot up to above US$3 per gallon, and by 2014 they’d gone above US$3.50 per gallon. That would have been a very bad time to even consider raising the tax. Yet now prices are at historic lows thanks to shale and to a global glut. In fact, prices are so low that on some part of the States, rivalry between two or more gas stations has led to prices as low as US$0.95 and even US$0.78 per gallon. True, these extremes were touched for a few hours but they are indicative of price developments prompted by global fundamental trends.

So, drivers across the states that have not yet hiked their gas tax can reasonably expect that, in the not too distant future, they will have to pay more for gas, regardless of which way global prices go. That’s the bad news. The good news is that these global prices are unlikely to go much higher than they are now, as long as shale producers continue ramping up their output and lowering production prices. Unless, of course, it turns out that the shale boom is actually a bubble as some observers argue.

OPEC Production Cut May Need to Be Extended: Oil Ministers

Submitted by Irinia Slav via OilPrice.com,

The oil ministers of Iran and Qatar have suggested that OPEC’s production cut agreement may have to be extended beyond the June deadline, despite an almost 100-percent compliance rate.

The comments come a day after the American Petroleum Institute reported the second-largest crude oil inventory increase in history, at 14.227 million barrels, which added fuel to worries that production cut efforts are not enough to rebalance the market.

Iran’s Oil Minister, Bijan Zanganeh, told Iranian media after a meeting with his Venezuelan counterpart that the option of extending the cut needs further study, but, he said, “in principle” the group must do it. Zanganeh also said that most OPEC producers would be happy with oil at US$60 – a level that has proved difficult to reach.

Qatar’s Oil Minister Mohammed Al Sada, for his part, spoke at a news conference in Doha, saying that the oil market may rebalance in the third quarter, adding that “it’s too early to make a judgment.”

At the same time, however, Qatar’s Finance Minister said that the country is comfortable with the current level of oil prices, with expectations that it will be able to plug its budget hole this year, at oil price levels of US$45, as stipulated in the budget.

The latest update from OPEC on how the production cut was progressing pegged daily production for January at 32.89 million barrels, versus a target of 32.5 million barrels. This represented a compliance rate of 91 percent and suggested that nearly everyone is on board with the market rebalancing effort.

Iraq is still producing 130,000 bpd more than agreed, but as a whole, the cartel is exceeding expectations of compliance. This, however, seems to be insufficiently lifting benchmark prices. After API’s report yesterday, WTI slipped below US$52 and Brent dropped below US$55.

Both WTI and Brent benchmarks climbed following Wednesday’s EIA inventory report that showed gasoline inventories decreased, contrary to yesterday’s forecasted build by the API.