At a glance
- Oil and gas companies are facing a labor shortage that poses serious risk to the industry’s efforts to recover from the tumult of the past two years.
- Some workers are moving to the renewable energy space, while others are leaving the industry altogether to join other, more lucrative or stable fields such as manufacturing and tech.
- Organizations can take concrete actions—including increasing automation, developing renewables businesses and integrating an environmental, social and governance plan—to mitigate the mass quits and help companies stay competitive.
North American oil and gas companies are facing a labor shortage that poses serious risk to the industry’s efforts to recover from the tumult of the past two years. Some workers are moving to the renewable energy space, while others are leaving the industry altogether to join other, more lucrative or stable fields such as manufacturing and technology. Reuters reported 43% of workers surveyed globally in 2020 wanted to leave the energy sector altogether in the next five years.
Meanwhile, energy demand has been rising due to a plethora of factors, including the unleashing of pent-up demand for goods and transportation, plus the eagerness of governments and businesses to reopen and facilitate recovery. After an initial period of hesitation, companies have been ramping up production. Oil companies in Alberta, Canada, yet again are looking to Quebec and the Maritime Provinces to hire workers.
But this time around is different. Gone are the days when workers flock to the field from all over the country during an oil boom. Despite promises of generous pay amid historically high crude oil prices, not nearly as many workers are coming.
A few main factors are driving the current labor shortage in oil and gas. First, the entire economy is in a seller’s labor market. Unemployment dropped to 3.9% in December in the United States and 6% in Canada, nearing full employment, with job vacancies and the rate of quits climbing by the day. This means workers get their pick. Those who have been contemplating a career move have ample incentive to jump ship—and plenty of those who have tried have found success.
Second, workers are no longer motivated solely by high wages. This is in part a result of the pandemic, which made people readdress their priorities. Some might have realized they find greater value in their family time, health, and overall quality of life, all of which are hard to come by when working long hours in the field for weeks, far away from family.
Third, despite generous compensation, job security is low in the oil and gas industry. Two collapses occurred in the past decade alone, in 2014 and 2020, each with mass layoffs. The threat or reality of getting laid off and having to look for a new job every few years negatively affects quality of life and pushes workers to look elsewhere.
Fourth, mainstream perceptions of the oil and gas industry—and fossil fuel more generally—have shifted over the past decade as awareness of human-caused climate change has grown. To millennials and Gen Z, a career in oil and gas might not look as attractive as one at Tesla or in the growing renewable energy industry.
The labor market shift
Oil and gas workers are a diverse group ranging from rig workers to petroleum engineers to professionals with highly transferable skills in areas such as IT, according to a LinkedIn workforce survey. Taking advantage of the heated labor market, some workers have moved to manufacturing or construction, where the transition seems natural.
Taking advantage of the heated labor market, some workers have moved to manufacturing or construction, where the transition seems natural.
But people in the industry are also moving to jobs in spaces that might seem farther from oil and gas. Growth in tech and the digital economy brings high wages—in many instances matching those in oil and gas—and good benefits, making this space an appealing alternative. Furthermore, workers can transition to tech by enrolling in short courses as opposed to going back to college for another degree as may have been required in the past. In fact, 52% of oil and gas workers need under six months to reskill to work in tech, according to data from the World Economic Forum.
Within energy, the number of jobs in renewables is growing, and those working in oil and gas often have valuable expertise to transition.
For now, high wages might still attract enough workers to boost production. But while the labor crunch in the economy might be temporary, the change in workers’ preferences presents a more stable and structural shift unlikely to reverse in the long term.
The oil and gas industry will continue to experience a net loss of workers in the coming years. What can businesses do to address labor shortages?
Automation will continue to be key in reducing dependency on workers and increasing efficiency. Technological advances such as those in oil field automation will likely help the industry combat the need for frequent hiring and layoffs that has long characterized the boom-and-bust cycle.
The opportunity to diversify and invest in renewables remains a wide-open and promising avenue, as demonstrated by companies such as Shell and BP. With abundant capital as well as deep expertise and industry connections, oil and gas companies possess advantages that will help them branch into renewables businesses.
The benefits of a renewables business include potentially easier talent recruitment and retention, as some younger workers prefer to work in renewables. In addition, a diverse energy mix means companies are less susceptible to revenue fluctuations in the face of an oil price collapse and can benefit from federal and local support programs designed for the energy transition.
Incorporating a position or plan related to environmental, social and governance issues within the workplace can also help to attract and retain talent. Relatedly, workplaces with a strong focus on diversity and inclusion, flexibility and professional development opportunities will resonate with younger workers.
While most businesses across the North American economy right now are feeling the impact of the labor shortage, oil and gas companies will continue to face this challenge in the long haul. Organizations can take concrete actions—including increasing automation, developing renewables businesses and integrating ESG—to mitigate the mass quits and help companies stay competitive.