As the United States President Trump administration encourages oil and gas companies to increase production, introducing a wide range of policies to support the expansion of fossil fuels, several U.S. companies are announcing widespread job cuts. Despite major oil and gas production expansion in the U.S. over the last few years and the potential for further growth, several oil majors have been forced to cut thousands of jobs over the last year.
Since the Covid-19 pandemic, we have seen the era of the “megamerger”, with several U.S. oil majors acquiring smaller companies and expanding operations at home and abroad. Since 2023, Chevron, Exxon, ConocoPhillips, and Occidental have all acquired smaller fossil fuel companies to increase their production capacity. However, in recent months, many of these oil giants have been forced to lay off thousands of workers in the face of lower oil prices to cut costs.
In September, Texas-based ConocoPhillips announced plans to cut up to 25 percent of its global staff, or as many as 3,250 people, most of whom would be gone by the end of the year. The firm currently employs around 13,000 people. Dennis Nuss, a company spokesman, said in a statement, “We are always looking at how we can be more efficient with the resources we have.” ConocoPhillips completed its $17 billion acquisition of Marathon Oil this time last year, significantly expanding operations, as well as increasing the number of workers under its management.
The Trump administration has introduced a plethora of new policies aimed at accelerating oil and gas permitting and enhancing access to federal land for exploration, moves that are expected to spur greater fossil fuel exploration and production in the coming years. However, some of these policies will take several years to come into effect. All the while, fossil fuel companies that have spent heavily on major acquisitions in recent years are battling low profits.
Although oil prices have increased in recent months, they are nowhere near the post-pandemic highs that were seen a couple of years ago. The average price of crude in the U.S. has been around $64 a barrel this year, meaning companies have been able to continue drilling but not make such a high profit as in previous years. This led ConocoPhillips' profits to decrease by 15 percent year on year, to $2 billion in the second quarter.
Earlier in the year, the United States' second-largest oil company, Chevron, also announced plans to lay off up to 20 percent of its workforce by 2026, which could amount to as many as 9,000 people. In May, Chevron laid off 800 employees in the Permian basin as part of cost-cutting plans, following 600 layoffs in California earlier in the month.
Chevron recently saw its license to produce oil in Venezuela revoked, which reduced its foreign crude production. However, the oil major also recently won its case against Exxon Mobil in a dispute over Hess Corp.’s offshore oil assets in the South American nation of Guyana, allowing it to complete its $53 billion acquisition of Hess and expand its Guyana operations.
Halliburton and the oilfield service company SLB also announced they would be reducing their workforces earlier this year. Lower oil prices have made 22 public U.S. producers in total – not including Exxon or Chevron – cut their capital spending by $2 billion, according to a Reuters analysis of second-quarter earnings announcements.
In recent months, the Organisation of the Petroleum Exporting Countries and its allies in the OPEC+ have fought to win back market share that was lost to the United States and other producers in recent years. After several years of strict quotas on oil output, OPEC+ announced plans to increase production by 137,000 barrels per day starting in October, which could drive down global oil prices. OPEC+ quota increases have already led to a decrease in international oil prices by around 12 percent this year, to just above breakeven levels for many U.S. oil companies.
The number of U.S. rigs in operation has fallen this year, by around 69 to 414, according to Baker Hughes. Kirk Edwards, the president of Texas-based Latigo Petroleum, said, “We've gone from ‘drill, baby, drill' to 'wait, baby wait’ here in the Permian.” Many U.S. producers are waiting for oil prices to increase before they raise production, requiring between $70 and $75 a barrel to put rigs back into operation.
The decision to cut spending by many U.S. oil and gas majors, which follows a post-pandemic era of megamergers and high spending, has resulted in widespread job cuts. As OPEC+ looks to increase production in the coming months, we can expect the low oil price trend to continue, likely resulting in low profits for several U.S. companies, and cautious spending plans are expected for the coming months.
By Felicity Bradstock for Oilprice.com