By David Yager
October 5, 2020
Exactly when the prolonged downturn in Canada’s oil and gas industry becomes an “economic emergency” is a personal decision.
For the tens of thousands who have lost their oilpatch jobs and never found another it could have happened anytime in the past five and one-half years.
For thousands more it took place when the government-mandated COVID-19 lockdown began in March.
For Alberta Premier Jason Kenney it occurred on October 2 after Suncor Energy announced its decision to lay off up to 15% of its employees, resulting in as many as 2,000 more unemployed workers in the next 18 months.
Kenney told the world, “This truly is a jobs crisis and an economic emergency and it deserves to be responded to here in Alberta the same way it would be in Ontario or Quebec.”
The Premier aimed his words directly at the Justin Trudeau’s Liberal federal government which for five years has pursued policies that hurt oil jobs and the economic health of Alberta’s core industry. There is no shortage of evidence to support this accusation.
In 2020 it is now open season on oil workers. After 30 years of growing alarmism, for the deeply climate concerned you can’t fire too many and you can’t act too soon.
What makes it worse is the compassion historically associated with people who lose their income – and possibly their homes, savings and dignity – has disappeared with the jobs. Because of the greater menace of climate change, eliminating oil jobs has morphed from tragic to essential.
The only sop to the human tragedy is the repeated call by some climate crusaders for a “just transition” – whatever that is – and, in the COVID-19 era, billions of dollars of government relief funds to cushion the financial impact of job losses.
The increasingly repeated mantra is that world oil consumption has peaked. Therefore, growing the business that powered the development of modern civilization is no longer necessary.
This isn’t actually true because of decline rates and the lack of practical alternatives. But truth appears to be another casualty of life in the 21st century.
Have you ever fired anybody? Looked an employee in the eye and told them you couldn’t afford to pay them any longer? Or made the final decision on whose jobs will live or die?
I have. Many times. I have directly, or in an executive capacity indirectly, fired hundreds. To sustain the company during numerous tough times I have had to send way too many people home way too often.
It’s terrible. Or at least it used to be.
The first time I had to fire several people immediately was in 1991. After advising one of the women she was losing her job she started crying as she asked me how she was going to provide for her five children. I held it together for the short walk to my office where I closed the door and wept uncontrollably. I was 38. She didn’t know it, but she took it better than I did. That day at least. The job market wasn’t as bad as now, but alternative employment was hard to find.
I took it less personally after that. The economy started growing again so those who were let go could find other work. Hiring and firing became part of the management process. When the world financial crisis hit in 2008 our cash flow went to zero in 90 days. Running a much larger company, I oversaw the decision to dismiss about 300 of 900 employees. Plus wages cut for everybody else.
Since oil prices collapsed over five years ago, tens of thousands of Canadian oil workers know all about losing their job. Every manager in the business has had to send somebody home. It is devastating for workers, their families and the greater economy.
Those who lose their jobs are the dismissed. Oil workers have been dismissed all right, but in many more ways than you think.
Those who fire people – directly or indirectly – are the dismissers. Who they are and how and why they do it requires further examination.
In the private sector hiring people is a badge of honor, the least appreciated metric of growth and success. Companies are often criticized for having too much staff or letting people go but seldom praised for hiring. For most of Canada’s history a growing economy has been taken for granted.
When times are good and the company is expanding, managers sometimes hire more people than they need. Executives and managers love growth. Sometimes there’s a bit of empire building by managers who measure their own importance by how many people report to them.
But when the tough times arrive for whatever reason, this must all be undone. Some do it voluntarily. Others hire consulting efficiency experts and contract dismissers. Fixed cost reviews are a common check and balance. If you’re growing with debt you have to be profitable enough to service it or you risk losing the company. When you expand with equity from external investors, if you’re not earning them a competitive return, be assured they’ll let you know.
Historically, successful oilpatch businesses and their employees have shared an unwritten contract. Because employees in all but entry level positions are highly skilled and trained, retaining employees was an investment in the future. That disappeared with the big downturn. People become expendable when they are easy to replace.
Because of climate change we’re told the entire fossil fuel industry should be replaced as quickly as possible. One colossal physical and human stranded asset.
We are inundated nowadays with the message that society must be about fairness, dignity, respect, humanity and consideration for others. Black Lives Matter. Racial equality. Indigenous rights. Gender equity and self-identification.
However, this compassion is not extended to oil workers. Since fossil fuel extraction is a sunset industry, these folks are doomed anyway. Get with the program and learn how to install solar panels. The indifference to how pipeline obstruction in BC and Quebec costs fellow Canadians their jobs in western Canada is infuriating for many and discouraging for everyone.
The trend is global. Shell just announced it is letting 10% of its workforce go. The headline blared, “Shell to cut 9,000 jobs in shift to low carbon economy”. The Reuters news report read, “Reducing costs is vital for Shell’s plans to move into the power sector and renewables where margins are relatively low.”
BP said it would let 10,000 people go earlier this year, Chevron 6,750. Equinor announced it was shrinking its exploration group by 30% because it won’t be looking for as much oil.
Layoffs ramped up yet again after oil prices collapsed this spring. CAPP figures 28,000 oil jobs have disappeared this year. The CAODC reports its member companies have cut their staffing levels from to 20 to 50 per cent.
Then Suncor dropped its bomb on October 2. They didn’t claim this was because it was exiting the oil business and embracing renewables, but to remain competitive.
That’s the politically correct word for profitable. Be assured profit is not a dirty word for this writer.
Alberta produces monthly and annual labor force reports using Statistics Canada data. The broad categories for industrial and resource-based employment are professional/scientific/technical, construction, mining/quarrying/oil and gas extraction/forestry, manufacturing, and agriculture.
In 2014 these big job buckets employed 824,100 of 2.277 million workers, or 36.2% By 2019 this figure was only 700,200 of 2.263 million workers, 29.7%. That’s 123,900 fewer jobs.
Then along came COVID which made everything much worse. The latest data is from August. While construction jobs were up year over year (likely supported by significant government funded road and infrastructure development), the other sectors were terrible. Since the end of last year mining/quarrying/oil and gas extraction/forestry shed another 20,500 jobs, manufacturing 15,200 and agriculture 10,600. This is 46,300 more lost jobs this year.
These are not all direct oil jobs. But many are certainly indirect like manufacturing. The data certainly reinforces Premier Kenney’s assertion of a “jobs crisis” in Alberta.
You’ll be relieved to learn the public sector has been spared. The broad categories of health care/social assistance, educational services, public administration, and information/culture/recreation had 525,900 workers or 23.1% of all reported jobs in 2014. By 2019 this figure was up to 640,800 or 21.8% higher over five years, a gain of 114,900 workers. Alberta’s population grew by only 7% in the same period. In August governments still had 622,500 employees thus had retained 97.1% of the jobs reported for 2019.
Many others cost oil workers their jobs, but not directly. These dismissers espouse positions, write policies, influence voters and lobby governments to make decisions that cause oil companies to lay off staff. Without any blood on their hands.
Indirect dismissers and their peers are rarely affected personally, remain employed, and get to deal with statistics instead of people. They always claim to be doing the right thing, occasionally express at least some remorse for the dismissed, and are ok with the government spending lots of everybody’s money on programs to prevent the recently unemployed from starving.
Obviously the COVID-19 pandemic has had a huge impact on oil jobs and economy. But in Alberta, it started five years earlier. There are many more forces affecting oil industry employment than coronavirus.
Climate change. Pipeline opposition. Transportation blockades. Carbon taxes. Anti-oil divestment movements. A new and unpredictable federal major project review process (C-69). An arbitrary and regional tanker ban targeting only Alberta oil (C-48). Political policies that penalize one product or industry or region while simultaneously supporting others.
These are all oil job and investor confidence destroyers. Conceived and supported by people who cannot or will not imagine life without their hydrocarbon fuel and by-products.
Since elected in 2015 the Trudeau administration has consistently pursued policies that make it difficult for Canada’s oil and gas industry to grow. While they refuse to admit it publicly, the overall thrust of federal policy has been to let the oil and gas industry wither away.
In its defense, Ottawa is quick to remind everyone that it bought and is building the Trans Mountain pipeline. It is years behind schedule, billions over budget and may never actually carry oil if determined opponents have their way.
The federal government approved LNG Canada. But the pipeline carrying the gas to the coast is back in court in BC, the latest challenge being that transient male workers could endanger the safety of Indigenous females. Rail blockades in solidarity with the First Nations objecting to the Coastal GasLink pipeline shut the country down early this year.
During the recent Throne Speech and despite the COVID-19 economic crisis, the Liberals restated that one of their primary policy objectives remains to meet or exceed Canada’s 2030 Paris emission reduction commitments and for the country to be “net zero by 2050”. The Clean Fuel Standard with higher carbon taxes remains in place as an important tool.
On October 2 Premier Kenney specifically questioned why the Clean Fuel Standard couldn’t be cancelled or delayed given the current employment devastation.
As BP illustrated in its recent forecast of what oil consumption must be in 30 years to achieve net zero by 2050, the Canadian oil business will be crushed under the current federal government plan. BP calculated that for the world to meet this lofty objective oil consumption must decline by 70%. Only the lowest cost producers will survive, probably supplying feedstock for essential plastic products like cellular telephones, medical supplies and food packaging. These aren’t likely to be replaced with materials from plants.
It is unlikely that India, China or Africa will participate. Or even try.
Supermajors Shell and BP are firing people all over the world by the thousands. They claim to be committed to exiting the oil business. Because that’s what the climate alarmist crowd wants and apparently what the future of life on earth requires.
Lose your job today or leave a dangerous world for your children tomorrow. There’s a compelling fork in the road. One leads to misery, the other despair. Wow.
The latest definition of correct behavior for the E&P sector is ESG, environment and social corporate governance. While famed economist Milton Friedman wrote in 1970 that the sole purpose of a corporation was to make money, in the past 50 years social corporate responsibility has become the new buzzword. Social justice. Treat people fairly. Protect the climate. Save the world. Net zero by 2050.
For oil this means confessing to your shareholders that you acknowledge that your primary product causes climate change, that climate change is bad, and the company’s future now carries greater risk.
But the recent layoffs prove the fundamental behavior of boards is still about the share price. In an exchange on social media following BP’s recent public course change, CEO Bernard Looney wrote, “But I have a different view which is – if anything – the share price performance of the oil and gas sector is a robust case for change. Time will well of course. In the meantime – we’re 100% committed and very focused on executing the policy we have laid out.”
And I don’t have a problem with that. BP’s shareholders will decide if the current management and board is making the right course correction.
What bothers me is that the combined forces of the legion of indirect dismissers has left corporations and their directors with few options.
The ESG and fossil fuel divestment movements have proven extraordinarily successful. So has the oil-has-no-future narrative. In the quest for liquidity and survival in the worst market imaginable, producers are selling whatever they must to keep the lights on.
With no market for their assets and restricted access to debt or equity, they are selling their future. By figuring out by how much they can reduce staff while still keeping the company functioning.
It didn’t work for BP or Shell. They are saying all the right things and laying off thousands, but their share prices remain at 25-year lows.
The absolute deafness of this Trudeau administration and what has been coined “Laurentian Canada” to the plight of ordinary oil workers is manifesting itself in despair, anger, frustration, alienation and numerous protest organizations and movements that question almost every legal and structural arrangement between the west the rest of the country.
Ultimately the behavior of oil companies is based on cash flow and confidence. Cash flow is determined by price, volume and cost. Confidence is completely different, and confidence in the direction of the federal government and the country has been in continuous decline for five years.
A single speech by Prime Minister Trudeau dedicated to unequivocally supporting Canada’s oil and gas industry accompanied by some modest policy changes would make a huge difference in providing the E&P sector with the confidence to stick with their plan, their team and their country.
Don’t hold your breath. This is all about politics, and even during an “economic emergency” that’s all that matters.
David Yager is an oil service executive, energy policy analyst, oil writer and author of From Miracle to Menace – Alberta, A Carbon Story. More at www.miracletomenace.ca