Outside the energy industry’s premier conference in Houston this week, a qualified petroleum engineer, immaculately dressed in suit and tie, has been holding up a sign saying: “Please hire me!” He has been a victim of the sector’s worst downturn for three decades, one of the 95,000 people who have lost their jobs in the US oil industry since 2014. The odds are against him. Oil companies are working to put in place lower cost bases that will enable them to survive in a world in which crude prices could remain at about $50 per barrel for many years to come. Two years ago John Watson, chief executive of Chevron, observed that “$100 per barrel is becoming the new $20”. He meant that the cost of finding and extracting oil had risen so much that companies like his needed a markedly higher crude price to achieve the same profitability that had been possible at significantly lower levels a decade earlier.
Today, it seems that $50 is the new $100. As Ali al-Naimi, Saudi Arabia’s oil minister, warned executives at the IHS CERAWeek conference on Tuesday, producers of higher-cost barrels “must find a way to lower their costs, borrow cash, or liquidate”. Oil is a cyclical business, and there is a general consensus in the industry that current prices of about $34 per barrel for internationally traded Brent crude are unsustainably low. But oil executives are not expecting a rebound to anything close to the prices of $100-plus that seemed barely adequate only two years ago.