Energy Jobs: Automation and Numbers – 2/10/17

If members of Congress and the new President are really dedicated to wringing more jobs out the energy sector, then they should make sure they’re looking for them in the right place.

Since oil prices collapsed in 2014, Bloomberg estimates that 440,000 jobs in the U.S. have been lost as a result of the downturn. As a result, the world’s biggest oil services companies have had to spend billions on severance costs and, now, few seem ready to risk a repeat of that huge expense. Many in the oil industry are increasingly turning to automation to replace many of the lost jobs, a trend unlikely to change as technology costs continue to fall relative to wages. The UBS estimates that the US oil industry will only need about half as many workers per barrel of oil produced post-2017 versus pre-2015.

That doesn’t necessarily mean that states known for oil output are heading for high unemployment rates. For example, Texas may have suffered greatly during the 1980’s oil price downturn, but its economy has since become far less dependent on the commodity thanks to strong growth in other sectors. In fact, Texas has had net creation of new jobs recently despite the severe oil price downturn.

Only about 2.5% of Texas’ employment was related to natural resource extraction before the crisis because oil was and increasingly is not a particularly labor intensive industry. Even now Austin and Dallas are thriving with job growth rates of 4.3% and 4.2% respectively because neither city is dependent on oil prices to drive economic growth. Overall, the biggest oil producing state in the U.S. has held together just fine despite the lower-for-longer oil prices.

Meanwhile, large number of new energy jobs are coming from the wind and solar energy industries. U.S. wind-farm developers and suppliers had more than 100,000 workers at the end of the year, compared to 65,971 coal mining jobs at the start of last year, according to the U.S. Energy Department.

Perhaps surprisingly, the top 10 congressional districts for wind energy are all in Republican-dominated red states such as Iowa and Texas, according to American Wind Energy Association CEO Tom Kiernan.

“We’re hiring workers in the rust belt,” Kiernan said in an interview. “We’re helping families keep farms they’ve held for generations. The lifeblood of our industry is in rural America.”

And the extension of two key federal tax credits by the Republican-controlled Congress at the end of 2015 along with the fact that the new Energy Secretary, Rick Perry, saw Texas become the largest producer of wind power during his term as Governor gives some cause for optimism in the renewable energy companies.

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