In last week’s blog, I discussed some of the career-related effects of the current rapid declines in the price of petroleum. I mentioned that low-skilled workers in the oil patch will see job losses, and that the advantages that manufacturing will enjoy from low energy costs will be offset in some sectors by diminishing demand from the petroleum-extraction industry and from overseas buyers whose currency is losing ground to the dollar. This week I’m starting to wonder whether I was over-optimistic about the continuing outlook for green energy careers.
In the transportation industry, the large purchasers of energy (such as many airlines) are committed to hedging arrangements that prevent them of them from rapidly taking advantage of downward swings in price. But other airlines have reduced their hedging or have used the strategy of call options that don’t have to be exercised. This is also true for large truck fleets. And, of course, the current low prices will allow these transportation companies to lock in rates that will be advantageous when the price rebounds (although that may take some time). So the low price of oil has improved the long-term outlook for work in these industries.
Small trucking operations, those least likely to use hedging, can immediately profit from cheap diesel fuel, which will create opportunities for drivers and other workers at businesses that use these trucks. In fact, even before the price of oil plummeted, the long-distance trucking industry was expecting to face a shortage of drivers. A year ago, the Bureau of Labor Statistics was already saying (after now-obsolete comments on the rising price of diesel fuel), “Job prospects for heavy and tractor-trailer truck drivers with the proper training are projected to be favorable. Because of truck drivers’ difficult lifestyle and time spent away from home, many companies have trouble finding and retaining qualified long-haul drivers.”
The outlook is not good for state workers in the oil patch. As extraction slows down, states that depend on severance taxes (that is, taxes on the extraction of nonrenewable resources) will have less revenue to spend on road repair, aid to education, and other state budget items. In 2003, Alaska obtained 78 percent of its tax revenues from severance taxes; North Dakota, 46 percent; Texas, 9 percent. Other states, however, will have more tax revenue to spend as consumers increase their purchases in response to their low gas-pump expenditures and the general uptick in employment. Moody’s Analytics estimates about 5 percent growth in state tax receipts for the fiscal year ending June 30.
As I mentioned last week, the biggest concern now is a macroeconomic issue: How much of the declining price of oil is caused not by increased production but rather by decreased demand resulting from an economic slowdown in most of the world (with the United States a noteworthy exception)? One indicator pointing toward the latter explanation is the decline in prices of many commodities other than petroleum. The price of copper, for example, dipped sharply this week. A global recession would hurt job prospects even in the United States because of diminished demand for American products and services. The European Central Bank just got the go-ahead to take measures to stimulate the Eurozone economy in much the same way that our Federal Reserve did in response to the Great Recession. It remains to be seen exactly what the bank’s strategy will be, so it’s unclear whether it will be aggressive enough to provide sufficient stimulus.