Oil Prices Slump Haunts Industry: Global Oil Giants Cut Costs and Jobs

The world's largest oil and gas companies are cutting jobs, reducing costs, and scaling back investments at the fastest pace since the pandemic to cope with the prolonged slump in oil prices.

Chevron, BP, and other companies have laid off thousands of employees worldwide and pledged to save an additional hundreds of billions of dollars in costs. In addition, Saudi Aramco sold $10 billion worth of shares in its pipeline network company to raise funds, while Malaysia's national oil company announced the layoff of 5,000 employees.

The U.S. shale oil industry has been particularly hard hit, as evidenced by ConocoPhillips, which announced layoffs last week. However, Kirk Edwards, head of the Texas independent producer Latigo Petroleum, stated that this is not just a problem for ConocoPhillips but a red warning signal for the entire U.S. oil and gas industry.

Roe Patterson, Managing Director of private equity group Marauder Capital, warned that rising costs due to tariffs and weak oil prices caused by increased OPEC production are leading to job losses in the energy sector, and that U.S. oil producers are finding it difficult to sustain drilling and capital expenditures.

Challenging Oil Prices to Break Through

Due to limited global market demand over the past several months, coupled with continuous production increases by the OPEC+ organization, oil prices have been fluctuating around 60 dollars, nearly half of the peak price in 2022.

$60 is a red line for maintaining profits for major Western oil producers. As oil prices remain unable to break through, Morgan Stanley expects these companies to reduce their stock buyback scale in the coming months, as they can no longer continue to support investment plans and meet investor expectations for dividends and buybacks.

Wood Mackenzie predicts that global oil and gas production capital expenditure will decrease by 4.3% this year, reaching 341.9 billion USD, marking the first annual investment decline since 2020.

This is extremely severe for Texas, the center of the U.S. oil industry and home to giant oil-producing basins. ConocoPhillips CEO Ryan Lance has already announced that by this Christmas, up to a quarter of the company's employees (as many as 3,250 people) will lose their jobs.

Meanwhile, large oil companies are increasingly relying on outsourcing and new technologies, with administrative, accounting, and technical engineering positions being transferred to countries like India, while artificial intelligence offers opportunities to achieve more output with less input.

However, this still cannot reverse the decline in the number of drilling rigs and hydraulic fracturing crews in the United States. Patterson warned that the problem facing the oil industry is that, in the future, when the United States needs more oil, domestic production may not be able to meet demand.