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Record-Breaking Shale Patch Wages Defy Slowing Drilling Activity in the US

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Resilient Wages in the US Shale Patch Despite Slowing Drilling Activity

Wages for oil workers in the US continue to rise, reaching a new record high despite a slowdown in shale activity. According to a Labor Department report, average hourly earnings for front-line oil-and-gas workers increased by 0.9% in September to $43.63. This upward trend in wages defies the national trend and demonstrates the resilience of paychecks in the oil industry.

Challenges in the Oil Industry

While wages are on the rise, the oil industry faces challenges due to aging oilfields and declining productivity. With a 19% decrease in drilling since the beginning of the year, the US Energy Information Administration predicts a drop in output from major shale regions. This slowdown in activity reflects a slow-to-no growth environment in the upstream exploration and production industry.

Unemployment Rates and Industry Growth

The jobless rate in the oil and natural gas sector rose to 6.1% in October, higher than the overall US unemployment rate. However, the number of workers employed in the industry increased for the fourth consecutive month, reaching 119,100 in October. This indicates some level of industry growth despite the challenges faced.
Increasing Costs and Limited Supplies
Developing shale fields has become more expensive due to depleting inventories of top-tier targets and limited supplies of drilling and fracking equipment. This poses additional challenges for the industry, as costs rise and resources become scarcer. In conclusion, while the US shale patch experiences a slowdown in drilling activity, wages for oil workers continue to rise. The industry faces challenges related to aging oilfields, declining productivity, and increasing costs. However, the resilience of wages indicates some level of stability in the face of these challenges.

Implications of Resilient Wages Amid Slowing Drilling Activity for New Businesses in the US Shale Patch

The resilience of wages in the US shale patch, despite a slowdown in drilling activity, presents a complex scenario for new businesses entering the oil industry. The rising wages, as indicated by a Labor Department report, could mean a higher operating cost for new businesses.

Financial Challenges for New Businesses

With the average hourly earnings for front-line oil-and-gas workers increasing to $43.63, new businesses may find it challenging to maintain profitability while offering competitive wages. This could potentially limit the growth and expansion of new entrants in the industry.

Impact of Industry Slowdown

The slowdown in drilling activity, coupled with the challenges of aging oilfields and declining productivity, could further deter new businesses. The predicted drop in output from major shale regions reflects a tough business environment that new businesses must navigate.
Resource Scarcity and Rising Costs
The increasing costs and limited supplies of drilling and fracking equipment add another layer of complexity. New businesses must strategize effectively to manage these costs and ensure a steady supply of necessary resources. In conclusion, while resilient wages in the US shale patch may indicate some level of industry stability, they present a mixed bag for new businesses. Balancing competitive wages, managing slowing industry growth, and navigating increasing costs and resource scarcity are key challenges new businesses must address.
Story First Published at: https://financialpost.com/pmn/business-pmn/shale-patch-wages-hit-us-record-even-as-drilling-activity-slows
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