Long time readers will be aware of some of the past work I’ve done on exposing the popular rhetoric used by Alberta politicians regarding the importance of the oil and gas industry in the province.
For example, I’ve debunked the myth that oil and gas is Alberta’s largest industry, that oil and gas royalties fund government revenues, that oil and gas generates the most income tax, that oil and gas employs the most workers, and so on.
For today’s news story, I thought I’d explore the connection between productivity in the oil and gas sector and employment in that sector. I was a curious whether increased production actually leads to increased employment, as the industry and politicians keep claiming it does.
First, I found data on oil production, GDP, and job numbers for Alberta. Then I extracted and compiled data specifically for the “mining, quarrying, oil, and gas” sector between 2007 and 2020.
Let’s look at a few charts.
This first chart sees oil production for conventional oil and non-conventional oil (bitumen). Natural gas is not included in this chart.
We see that between January 2007 and January 2020, production increased significantly. In fact, production grew 113.7% during those 13 years, from 8.3 million m3 to 17.8 million m3.
Next is GDP. We see here that even though there was a bit of a dip at the start of last year (likely because of the drop in oil prices) and a bit of a dip because of the 2015–2016 recession, GDP generated in Alberta in the “mining, quarrying, oil, and gas” sector has increased during the same 13-year period I listed above.
Between January 2007 and January 2019, Alberta’s GDP produced by this sector increased by about $27 billion, from $64.01 billion to $91.03 billion. That’s a 42.2% increase.
And even if we include the $11 billion drop in GDP from the start of 2020 (despite it probably being an outlier), we’re still looking at an increase in GDP, by about $15 billion.
Not only that, but the proportion of the overall GDP generated by the “mining, quarrying, oil, and gas” sector also increased during this 13-year period.
Here, take a look:
We see that over the last 18 years, the “mining, quarrying, oil, and gas” sector has gone from generating 22.81% of Alberta’s GDP to over 26% of it during the last 3 years of the period.
From the 22.81% in 2007 to its peak of 26.5% in 2018, “mining, quarrying, oil, and gas” increased its share of the province’s total GDP by 16.3%.
So, over a period of 13 years, Alberta saw a 114% increase in oil production, a 42% increase in oil & gas GDP, and oil & gas made up a larger share of the total GDP of the province.
That must mean the industry created a bunch of jobs, right?
Well, that brings us to our next chart.
Overall, the “mining, quarrying, oil, and gas” sector actually lost jobs since January 2007, when it saw an even 150,000 people employed either full-time or part-time. Since then, we’ve dropped to 132,800, as of January 2020.
That’s a loss of 17,200 jobs. Or 12.95%.
Jobs were on the rise for a couple of years around the halfway mark, reaching as high as 173,660 jobs in 2014. But in the 6 years since then, it’s been pretty much downhill the entire time. Even the brief reprieve seen in 2018 and 2019 was still below the 2007 levels.
Really, when you look at it, 2020 was not only a loss of 17,200 jobs since 2007, it was a loss of nearly 41,000 jobs since 2014.
Let’s consider that for a moment:
| 2014 | 2020 | Change | |
|---|---|---|---|
| Production (million m3) | 13.4 | 17.8 | 4.4 |
| GDP (billion $) | 80.3 | 79.9 | -0.4 |
| % of total GDP | 22.9 | 26.0 | 3.1 |
| Jobs | 173,600 | 132,800 | -40,800 |
So if we produced 4.4 million m3 of oil in the last 7 years, if oil and gas GDP stayed roughly the same, if oil and gas made up a larger portion of total GDP, then why did the oil and gas industry lose nearly 41,000 jobs during the same period.
How is the industry pumping out 4.4 million more cubic metres of oil with 41,000 fewer workers?
Maybe through autonomous equipment, automation of control and safety systems, or joystick-controlled pipe-handling. Because if they’re producing more with fewer people, it’s not because the CEOs are donning blue coveralls.
And if they’re producing more now than ever before but with fewer workers, what guarantee will there be that giving them tax breaks, lowering their royalty rates, and otherwise subsidizing the industry will lead to more jobs?
9 replies on “Alberta oil & gas lost 10,000s of jobs yet produced more oil”
There are three main sources of job loss.
The proliferation of shale plays has also reduced workers as the plays extend over 100s of kilometres and the presence of oil and gas is known. This allows companies to drill the same wells over and over across large areas with no risk, and no need to employ armies of geologists and engineers to find additional oil and gas. So you can produce more oil and gas with fewer workers. This one is efficiency.
Consolidation. During the downturn in prices, companies believed the world was ending and started to merge. This allowed companies who were competitors in the same area to combine and run the area as one. So you need half the people to produce the same amount of oil and gas. This one is also efficiency.
So overall, this is a story of efficiency gains. Typically, once a company or industry gains efficiency they don’t give it back, so I agree with the sentiment that jobs are unlikely to come back, but it’s because the industry became more efficient, not more evil.
Thanks for the added insight.
On the last note, just to clarify: I don’t think I argued that the oil and gas industry is evil, let alone more evil.
All of the above points would seem to explain the decrease in jobs in O&G . However , given all of this our policy of low royalties, tax breaks and subsidies makes no sense.
Nor does it make sense that these financial policies would lead to more jobs.
A significant portion of O&G jobs in Alberta relate to expansion, not to production. If new projects and facilities are not being built, then Alberta’s O&G industry won’t be a big source of jobs. This is why looking to O&G as a long-term source of jobs never made sense, as that would only be the case if the industry never stopped growing and expanding. This also means that as the world continues to move away from fossil fuels, O&G jobs will decline long before O&G production/consumption declines.
Great points, Doug. Thanks for adding to the conversation!
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