But it's not just the big name oil producers that are feeling the pinch. The next phase of the oil glut and crash is being felt by the petroleum engineers who were enticed by the promise of the $100000+ starting salaries that were attainable just a few years ago.
Late last year I wrote about the “Oil World Order” and the changing face of the oiligarch-driven economy. It's been less than half a year since that editorial and things have already changed dramatically. In fact, the ongoing oil rout has assured that there are headline-making news stories coming out of the oil markets seemingly every single day.
Case in point: Saudi Deputy Crown Prince Mohammed bin Salman, the son of King Salman, made headlines this week by confirming that the Saudi government was going to be converting state-owned Saudi Aramco into a holding company with an elected board. As part of that, there will be an initial public offering on a share representing less than 5% of the company that is expected to net over $2 trillion.
This move is perhaps unsurprising given the abysmal state of the oil markets right now and the longer term plans to reduce oil consumption in the coming decades, but it is still a market-shaking development that would have been the sole point of discussion in the industry at any other point in history. But this is not any other point in history. Instead, we have a slew of massive stories this week to contend with.
Most shockingly, ExxonMobil has been downgraded by S&P from AAA to AA+. The cut marks the first time that Exxon stock has been downgraded since 1930, and will not only effect the company's borrowing costs (although it will obviously do that). It also takes away one of the company's prestige selling points when bidding for drilling licenses and other negotiations with oil producer nations. ExxonMobil stock, unsurprisngly, nosedived on the news.
Meanwhile the layoffs keep coming in the oil patch, upstream, downstream and everywhere else. The latest victims: employees of commodities giant Freeport-McMoRan. The company just released their first quarter report which notes: “FCX is taking immediate steps to reduce oil and gas costs further. In April 2016, FCX announced a new management structure and is instituting an approximate 25 percent oil and gas workforce reduction. The newly structured oil and gas management team is actively engaged in managing costs and developing plans to preserve and enhance asset values. FCX expects to record a charge of approximately $40 million in second-quarter 2016 associated with workforce reductions and other restructuring costs.”
But it's not just the big name oil producers that are feeling the pinch. The next phase of the oil glut and crash is being felt by the petroleum engineers who were enticed by the promise of the $100000+ starting salaries that were attainable just a few years ago. Now, as we know, things are not so great. The problem being that there are just too many of them and too few jobs. The Wall Street Journal did an entire article on the phenomenon last year, and OilPrice.com did an update to the story this week, noting how things are getting even worse for petroleum engineering grads, even ones from prestigious universities.
In any other time in history any one of these stories could have been the Headline of the Week in the oil industry. Now they're competing for attention in a market environment where bad news is the order of the day. Welcome to the New Oil World Order.