U.S. oil prices rose to $70 a barrel this week — a sign the industry is bouncing back after a bust brought on by the pandemic. That’s bringing a much-needed jolt into the local economy in Weld County.
Energy companies in the area shed thousands of jobs over the past year, but they’re now slowly adding some back. The sector added roughly 500 jobs in the past month, according to the Department of Labor and Employment.
KUNC’s Matt Bloom joined KUNC’s Colorado Edition to discuss how the recovery is going.
Henry Zimmerman: We know more people are traveling again. They’re flying, taking road trips to see family. And that’s boosting demand for oil. How is that showing up in the job numbers in Weld County?
Matt Bloom: A reminder to listeners we have tens of thousands of active oil and gas wells in Weld County and companies have really just been running a skeleton crew over the past year. That’s because oil prices have been historically low.
But over the past few months, the demand switch has been turned back on and suddenly the price is the highest it’s been in almost three years. Gas prices are up. And a lot of companies in the oilfield have reversed course and started hiring again.
James Smith is a driver. He hauls oil. His income was cut in half last year during the bust, so he left the industry for a while. But last month he got a call that the oilfield needed him again.
James Smith: There’s so much activity to haul oil right now and it's almost crazy actually. Prior to you calling me, I just received a call from my supervisor saying, “Hey, I had to switch up your dispatches. We had an oil line rupture. We're sending six trucks out to one location to bottom out every single tank they have.”
Bloom: So people like James are seeing their incomes return to pre-pandemic levels. But when you look at the overall picture in the Greeley metro area, the industry has still added back less than a third of the positions — 31% — that it cut last year. That’s a much slower recovery rate than other industries like restaurants and hotels, which are actually having trouble finding people to hire.
Zimmerman: Wait, so can you explain this disconnect? If the price of oil is going up, why aren’t we seeing a huge rebound in jobs in Colorado?
Bloom: I’d say it’s a two-part reason. The first being that companies aren’t actually drilling a ton of new wells yet, which would require more workers to do. They’re just going back to the wells that have already been drilled.
Second is a longer-term trend in the industry of consolidation that we’ve seen really ramp up over the past nine months. That has led to the elimination of a lot of jobs. Just this week, three of Colorado’s largest drillers, Bonanza Creek, Extraction Oil and Gas and Crestone Peak Resources, announced they’d be joining into one new massive oil company called Civitas.
I talked to Steve Diedrichs about this. He’s an economist with the energy analytics company Enverus in Denver.
Diedrichs said companies are facing a lot of pressure from investors to cut costs.
Steve Diederichs: There's much more of a call for operators to start returning value to shareholders. And generally the way to achieve that is generate free cash flow and start returning that. So it really sets itself up for the kind of that flat to super low growth that we're seeing operators guide to today.
Bloom: Diederichs says companies — even prior to the pandemic — were not performing well for a number of reasons. So, one way to cut costs is to join forces.
Zimmerman: We know that the energy industry is at the beginning of a major transition away from fossil fuels and toward renewables. Is that at play here, and what does that mean for the local economy in Weld?
Bloom: Well, what Diederichs and other economists have told me is that it means we just aren’t going to see a ton of growth in oil in Weld like we saw during the past decade. There will likely be a little bit of a boom as the world continues recovering from the pandemic. But a lot of investment at the local, state and federal level is in renewable energy projects.
For example, Platte River Power Authority, the electricity provider for most of Fort Collins, Loveland and Estes Park, just announced its plans to build its largest solar farm ever in Weld County starting later this year, which to me is pretty symbolic of what’s happening.
This conversation is part of KUNC’s Colorado Edition for June 8. You can find the full episode here.
