Recent drops in gas prices may have consumers smiling, but some TU petroleum engineering students are left without internships for this summer. Last June the price of a gallon of gasoline in Tulsa averaged about $3.50, but just six months later the price has been cut in two at around $1.75.
Many oil companies are sharply cutting expenses to match the decline in income. Oil tech company Schlumberger already announced the layoff of 9,000 employees worldwide. Baker Hughes has announced 7,000 layoffs worldwide.
“They will reduce the drilling activity and also become lean in terms of number of people,” said TU’s Petroleum Engineering Chairman Mohan Kelkar.
“I would expect some layoffs from the companies as they trim the workforce to reflect the reduced activity. There will be more reduction among the contractors as well as people involved in drilling and completion activities. I also expect a similar reduction in service companies employment.”
When asked if the recent downturn would affect TU’s job placement rate Kelkar responded, “I am afraid so. Students with limited summer experience and low grades would have a more difficult time in getting jobs. I expect that companies would continue to hire young people to balance their demographics. However, the number of new graduates hired will reduce over the next few years.”
“The oil price can be low for a while. It is very difficult to predict how long will it last. However, there is currently significant oversupply of production with respect to demand. It will take some time before natural decline in production will match up with demand. I would not be surprised if the oil price stays relatively low (less than $70 per barrel) for two years.”
Tori Weir, a petroleum engineering major graduating in Dec. 2015, spent last summer interning at Apache but received no internship offers this summer.
“Many companies have delayed hiring people,” said one undergraduate petroleum engineering major who recently had a summer internship rescinded and wished not to be named.
“It worries me some, there is no way that things will return to the same way before, but I genuinely think it will be better than it is now,” our source said after being asked about career prospects.
“It’s hard to say how long the low prices will go but I’m still hopeful for prospects after graduation. I am now considering studying abroad or taking summer classes.”
Experts at the US Energy Information Administration find it hard to predict how long the downturn will last, but most say that low prices will last at least another half year as supply remains high and demand slowly decreases.
“I suspect oil prices to recover faster than when they dropped in 2008 economic downturn,” commented TU Petroleum Engineering alumnus, Benjamin Paek of Halliburton.
“Most oil and gas operator companies have slowed down drilling. This may affect hiring in the short term for maybe one semester but companies are always looking for talent,” he said after being asked how TU’s hiring rate might be affected by the recent price drop.
Current prices of $48/barrel are unsustainable for many companies but those that use hydraulic fracturing are finding it especially difficult. Bloomberg New Energy Finance estimates that 37 out of 38 shale oilfields are below the break-even mark at the current price.
Analysts at Oil-price.net predict that the higher cost of fracking will cause its decline in 2015.
“Environmentally, it’d be good if fracking does slow down,” Sasha West, president of TU’s Earth Matters club commented, “but it’d be better to move away from needing oil and gas as a whole, regardless of the extraction methods.”
“It’s been established that cheap gas means people are less conservative with their gas use and diverts attention from our long-term need to move away from fossil fuels to cleaner, more sustainable alternatives,” West said.