Oil companies worldwide have been forced to lay off over 200,000 people since the price of crude fell below $50 a barrel earlier this year. Facing little change in prices, companies are now slashing wages to cope with continued profit loss.
The oil industry is trying to avoid losing skilled workers should crude oil prices begin to rise again, reports Nasdaq.
Canadian Natural Resources Ltd says it will avoid layoffs by capping bonuses and cutting wages for its 7,600 employees by 5 and 10 percent — depending on employee salary — reports The Wall Street Journal. Houston-based Occidental Petroleum has followed suit by telling employees it will freeze wages through early 2016.
Even small declines in the price of oil can have a huge impact on industry profits. According to Nasdaq, every $1 drop in price costs companies $120 million in annual cash flow. Big oil companies would like to avoid more layoffs for as long as they can, but that may not be possible for much longer. Occidental Petroleum CEO Stephen Chazen said that more job losses are likely to happen down the road, adding that bonuses “may be further reduced or eliminated.”
“There’s no more fat to be cut,” Deborah Byers, a partner at Ernst & Young and expert on the oil industry, told Nasdaq.
Economic uncertainty in China, as well as continued low prices from leading OPEC members will keep pressure on the oil industry and further squeeze their profits. The Wall Street Journal reports that OPEC is forecasting a drop in U.S. oil output in the coming year, casting doubt on the health of the oil industry moving forward.
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