With the Oil Boom Days Gone, Young Workers and College Students Rethink Their Plans

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By the time Jerid Rinehart got the phone call informing him he’d been laid off in February, he almost felt relieved. For weeks his stomach would start churning and his jaw would clench every time his phone rang. The company, Dynamic Drilling Solutions, had already gone through two or three rounds of layoffs. Back in December, he’d even been told he no longer had a job, and then his boss called about five hours later to tell him there had been a mistake and he should come back to work shoveling drilling mud as soon as he could. Still, even with less than two years of experience in the oil field, Rinehart knew the work wasn’t going to last forever.

Growing up in East Texas, he’d never worked in the oil industry before a friend approached him in 2014 and offered Rinehart a job in which he would make more than twice what the college dropout was pulling in as a waiter and bartender at local country clubs. Rinehart wanted to marry his childhood friend, Lauren, and the oil field position would make that possible. There was a boom on, and his friend reassured Rinehart he didn’t need experience as much as the company needed workers. “It was all about keeping those rigs running,” Rinehart says.

The first job brought in more than $8,000 a month and by September, he and his new wife were living in a trailer in Odessa while he worked at rig sites across West Texas. “I wouldn’t give up those first months of our marriage out in Odessa for anything,” Lauren says now. “Even with the layoff, it was still worth it to get that time just with us.” In November 2014, the friend who got him the job cautioned him to start saving money. Rinehart was aware oil prices had been falling since July, but the warning didn’t resonate until he was cut.

He got another oil field gig. It meant more physical work and longer hours, but he was still making $4,000 a month and Lauren was pregnant with their first child, so he was thankful to be earning a steady paycheck. Elizabeth May was born in December 2015 with Down syndrome — meaning surgeries, medical care and special care requirements — and the couple were finally able to bring her home from the hospital on February 1.

The next day, Rinehart got the phone call he’d been dreading. This time, it was his boss’s boss on the phone. A softspoken man, he asked Rinehart about the baby, chatted about how oil prices were at a record low, dropping below $30 a barrel for the first time in years, and seemed to be struggling to get to the point. Rinehart sucked in his breath and exhaled slowly as he waited on the other end of the line, trying to keep his pulse low.

“As soon as I heard him fumbling around and talking about how everyone is struggling, how they needed to tighten their belt and how I was a really good worker and this had nothing to do with the work I’d done, I knew,” Rinehart says now. It was his second oil field layoff in less than two years.

Right now countless people across Texas are having to rethink their plans because of the oil industry downturn. Fueled by technological innovation in horizontal drilling and hydraulic fracturing, the U.S. shale plays sparked an oil industry renaissance as oil prices soared past $100 per barrel and stayed high for years. All that time, the heart of the shale boom was in Texas, where boomtowns sprang up on top of oil-rich plays like the Eagle Ford Shale in South Texas and the Wolfcamp Shale in West Texas, and the busy oil fields buoyed the state’s economy even as the rest of the country struggled through the Great Recession. And then the boom that even old-timers in the industry had claimed would never end abruptly went bust.

Deborah Byers, the Houston managing partner for accounting giant Ernst & Young, says everyone underestimated the U.S. shale plays, and when prices started to sink, everyone expected Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, to step in as the “swing producer” and regulate its output to stabilize the price. But that didn’t happen. “Nothing played out as expected,” Byers says.

It’s taken months to become apparent that this isn’t a temporary downturn, Bill Gilmer, director of the Institute for Regional Forecasting at the C.T. Bauer College of Business at the University of Houston, says. “I’m done making predictions about this downturn in the industry anymore. I’ve joined everyone else now in terms of saying I really don’t know what’s going to happen next.”

The number of active rigs in the United States fell from about 1,600 at the height of activity, in October 2014, to about 350 in the field in March, the lowest number in use since oil field services company Baker Hughes started tracking rig numbers, in 1944. A recent study by Rice University has found there are more than 200 oil industry jobs tied to each rig. So far, the downturn has translated to more than 20,000 layoffs in Houston, more than 50,000 job losses across the state and more than 250,000 oil industry jobs cut worldwide.

Young people who have never been through an oil bust are having to develop backup plans. And it’s not only those already in the industry, the oil field, or the oil field service business who are having to reassess. College students now nearing graduation started school when the oil industry was robust and jobs were plentiful, but now are scrambling to find alternative options.

Last summer, Cory Caron, a senior at Texas A&M studying business and accounting, competed in an annual industry analysis contest sponsored by Halliburton. Caron, 23, and his team won second place for their analysis that found the situation in the oil industry bore a strong resemblance to the climate of the 1980s. “I could look things over and connect it to the 1980s bust, and it wasn’t that big a deal to me. I’ve heard of the bust, of course, but I wasn’t alive for it.”

By the time Caron started his internship at a major accounting firm this spring, he knew better than to bring up low oil prices, the infamous 1980s downturn or any news of layoffs at other companies when he was helping perform external audits of oil companies. “It’s not exactly a tension in the air inside the companies; it’s just this feeling you get even with the ones who are doing well. I knew not to talk about it,” he says. Despite his own fascination with energy, Caron is not going into the oil industry when he graduates in a year and a half. He’ll start work at an accounting firm. “They haven’t had layoffs at any of the big accounting firms yet,” he says.

What was supposed to be a blip, a bump, a stumble has turned into an extended crisis that is much bigger and is affecting the lives of far more people than just those in the oil field. The question is, why did almost everyone in the industry fail to see the bust coming?

Now Rinehart is working as a plumber, which doesn’t quite cover his family’s expenses. “It was something I was using as a plan B,” Rinehart says. “It was frustrating to need the job and to start back at square one again, but I know I’m lucky to have it.”


From the moment he strode into the Shamrock Ballroom at the University of Houston Hilton Hotel, everyone in the crowded room was watching Stephen Greenlee, president of ExxonMobil Exploration Company. Greenlee towered over most of the geophysics students and professors in the room, but he laughed a lot and was always smiling as he moved through the room sipping Scotch, casually pulling a crowd of admirers in his wake.

Graduate student Lucia Torrado put a smile on her face, stretched her spine to stand taller and angled herself toward Greenlee as she continued her project presentation on potential oil formations in her native Colombia. She emitted a tiny sigh as Greenlee moved past without stopping. Torrado wants to work in the U.S. oil industry after she gets her master’s in geophysics, but she’s already worried about the lack of jobs. “When I started school here, I was sure I would find something easily. The downturn has changed that. I don’t know what’s going to happen,” she says.

Tony Torlucci, a geophysics graduate student, wedged his body into the circle around Greenlee, wriggled until he was next to the man and then introduced himself, giving Greenlee a firm handshake. Torlucci, 27, has already been laid off from one oil field job, but he’s determined to make it in the industry. He went to work in the oil field when oil was just cresting above $70 per barrel, and he liked the work so much that he went back to school to become a geophysicist. “Things were busy then, and when it hit $100 a barrel a year later, it was even crazier, but when prices sank, the jobs started going away too,” he says. And when prices dropped, he was soon without a job. That worked out all right, though, Torlucci says, because he’d already decided he wanted to move in another direction. As a researcher, he’ll still be in the oil field.

Now — he’s optimistic — Torlucci’s applying for the geophysics Ph.D. program, and he thinks he’ll get out of school just in time for an upturn, when he believes some company will hire him to be a researcher. “Some people get into this and the goal is to make six figures, but that’s not what it’s about for me. The money is good when things are good, of course, but I love this. I want to be a real researcher for one of these companies.”

The ballroom was buzzing with more than 100 people who had gathered to hear Greenlee speak on a muggy Tuesday night in late March. Hotel employees rapidly set up more chairs as he took the stage. “Wouldn’t it be great if we could know when these boom-and-bust cycles were going to occur?” he asked the audience with a rueful grin. “Then we could always invest at the right times! It would be perfect! Well, we never know. That never happens, and these cycles are so manic that it’s impossible to ever know and it drives you crazy.”

Greenlee explained to the audience that the U.S. shale oil boom took most people by surprise. After the oil industry went bust in the 1980s, the decline and eventual end of Texas and U.S. oil production was accepted by most in the industry as a fact of life.

But the shale plays proved everyone wrong. In the early 2000s, drillers started using technology pioneered and improved by famed Texas oil man George Mitchell to employ slant drilling and hydraulic fracturing to access the dense, brittle shale formations. They dug horizontal wells along the shale formations and then shattered them by blasting the shale with water, sand and chemicals to release the hydrocarbons trapped beneath the rock. In just a few years, U.S. oil production numbers nearly doubled from about 5 million barrels per day in 2008 to more than 9.4 million barrels per day in 2015, the highest level of U.S. production since 1972.

However, while U.S. shale oil was flooding the world market, an unanticipated economic slowdown in China, the nation that previously had a seemingly bottomless appetite for oil, meant that there was nowhere for the oil to go.

At the same time, there was an unexpected problem with OPEC, a cartel-like group of nations that work together to try to control oil prices. For years, Saudi Arabia had stepped in and adjusted its own output to keep prices high. But this time around, the Saudis and other OPEC leaders declined to intervene after prices started sagging. The Saudis were the main force behind this decision, and they did it for myriad reasons — because they were irked by the amount of oil the United States was producing; because they were irritated by the U.S. negotiations with Iran over its nuclear program, one result of which would be the lifting of oil sanctions against the Iranians; and because tanking prices provided an opportunity to hit Russia and ISIS, since both depend on high crude prices to fund their operations. In November 2014, OPEC announced a decision to let the market run its course. Most people didn’t realize how these different issues would work together to crush the U.S. oil industry, according to Byers.

“It’s hard for people to see a downturn coming,” Byers says. This time, many in the U.S. oil industry missed the signs because they assumed demand for crude oil would continue to rise. On a global level, the leading oil producers simply missed the indications that U.S. shale plays were capable of producing enough to make a dent on the world market and carve out their own niche of the business. The Saudis in particular were frustrated by this, since it sliced into their portion of the industry. “Then China slows, the Saudis don’t step up and no one realizes that this is the way it’s going until it’s all in motion,” she says. “Almost no one thought OPEC would do what they did. By the time everyone clued in on all these factors, it was too late.”
But there’s always something unanticipated that influences the industry, Gilmer says. “There are more than 1,000 things that could go wrong, but you can’t bet on any single one of those possibilities occurring because the odds are too high that the one you bet on won’t happen,” Gilmer explains. “At the same time, to make a projection about the future in oil a year from now and be right, a thousand things have to go right. Every prediction you make, there’s a two-out-of-three chance that over the next year, something you never thought of will happen somewhere you’ve never even heard of and it will change everything.”

Aside from the difficulty involved in predicting how things will play out in the oil industry, most people are unwilling to risk predicting the end of a boom. “There are a lot of things that are too expensive to bet against, whether you’re betting your reputation or your money, and saying the boom was going to end would have been an expensive bet to make,” Gilmer says. “Even if you ended up right and everything happened the way you’d said it would six months ago, by then everyone has forgotten and you’ve been ridiculed to the point you may not stand up and say anything like that again.”

Ed Hirs, an energy economist at the University of Houston, was one of the few to predict three years ago that this boom would play out, naming OPEC as the likely culprit to blame for the oncoming bust a full year before the downturn. “If OPEC hopes to maintain any semblance of its cartel pricing power, now would be the time for its members to boost their oil output, drive prices down, bankrupt marginal American producers and regain market share for the long term,” Hirs told Forbes in June 2013. “In short, if OPEC simply declines to reduce its own production quotas in the face of growing U.S. oil volumes, the American producers could grow themselves right out of the money.”

His take didn’t go over well in the industry, Hirs says now. “I was vilified and ridiculed for saying it by so many people in the industry. Right up until the actual bust happened, just as I’d said it would, of course.”
Now companies are continuing to deal with the fallout. The shale boom led them to become complacent and “bloated,” Greenlee explained to his audience. Even adjusting for inflation, capital expenditures in 2014 were double what they’d been in 1982, just before the 1980s oil bust, and hiring was at record numbers.

When oil prices started tumbling in July 2014, $100 per barrel oil was gone and everyone in the industry including ExxonMobil had to cut the fat and figure out how to run a lean operation, Greenlee told the audience. Some of the smaller companies, the ones with more bank loans and risk, have struggled to figure out how to survive, and dozens have failed — more than 50 energy companies have declared bankruptcy in the first four months of 2016 alone.

The problem of reduced capital expenditures means companies don’t have money for exploration or innovation, let alone for hiring, Greenlee says. The energy downturn has even hit the banks, so it’s become difficult for smaller companies to get loans. Earlier this month JPMorgan Chase, Bank of America and Wells Fargo, three of the largest banks in the United States, all reported first-quarter profit losses due to the energy companies who have been struggling to make loan payments because of the downturn.
“When you look back at the banks’ predictions from even a year ago, it’s amazing to see how wrong JPMorgan, the Suisse Bank, Wells Fargo and all of these banks were,” Gilmer says. “Nothing is sure and nobody is capable of being sure.”

Meanwhile, U.S. production isn’t dropping as quickly as anticipated, and the global oil supply is expected to continue to exceed demand this year and in 2017, according to the March 2016 report by the International Energy Agency, a Paris-based intergovernmental organization that analyzes and reports on the global energy industry.

Everyone, including Exxon, is figuring out how to function in this new environment, Greenlee says. “My advice for y’all isn’t to get out of the oil business,” Greenlee told the audience. “But if you’re going to school right now, I wouldn’t rush things. Don’t graduate right away. Take a couple of years if you can.”


Sarah Williamson, 30, stood in front of a mirror, smoothing down the lines of the sleek gray wool, her “interview dress.” She’s worn it to countless University of Houston job fairs over the past six months because it makes her feel as if she really looks the part of a petroleum engineer. As she scrutinized her reflection, adjusting her hair and slipping on the cream-colored sweater she always wears with the dress, she considered stopping by the teaching booths as well. “Maybe it’s worth checking it out,” she told herself, “just in case.” Even though Williamson left elementary school teaching a few years ago to go back to school and get a baccalaureate in petroleum engineering, she’s graduating in May and she still doesn’t have a job lined up.

At the job fair, Williamson chatted with elementary school representatives who were thrilled to see that she had extensive science and math skills on her résumé. “It’ll be fine,” she told herself. “I like teaching, and this will help me get through until industry jobs open up again.”

That night at dinner, her father, who has more than 30 years of experience in oil and is the one who encouraged her to go into petroleum engineering, told her she was smart to be looking at teaching positions until things improved for the upstream oil industry. Her mom chimed in, suggesting Williamson might start working on a graduate degree while she taught and waited for the industry to turn around. “I was aware of the downturn before then, but I stayed optimistic, or at least really tried to, but after that I realized this isn’t getting any better, so I really needed to start considering other options,” she says now.

The downturn has already prompted a brief uptick in enrollment in higher-level energy-related degrees at the University of Houston, UH geophysics professor Rob Stewart says, but everyone is expecting a drop in energy program class sizes this fall, much like the decline in energy studies in the mid-1980s that led to a generational hole in the workforce. “Our enrollment really does follow the price of oil,” Stewart says.

People are going into banking and the downstream, refinery side of the business (which is doing well because of cheap oil), and some are going back to school, the time-honored hideout, he says. Right now, it’s all about finding other ways to use the skills you gained readying yourself to work in the oil industry. “I’ve written more letters of recommendation in the past six months than I have in the last decade. We’ve had a fair number of people changing positions, changing industries. I tell them to explore all the avenues in the technical world and to be open. After all, a geophysicist invented Auto-Tune. Anything can happen,” Stewart says.

Growing up in Houston, Alex Huang, 23, was obsessed with oil the way other kids are fascinated with dinosaurs. He was in middle school when the shale boom started. By the time he graduated high school and was admitted to Rice University, his plan was to study finance and get a job at one of the big oil companies. In the face of the industry’s decline, he’s decided to focus on banking instead. “Now finance makes more sense.”

Yue Du, a University of Houston Ph.D. graduate in geophysics, won an internship at one of the largest oil companies in the country in the fall of 2014. At the end of her internship, in December 2014, the company extended Du an offer to start a job once she graduated in the spring. In May 2015, Du, 29, began work. “I feel lucky and thankful the job was still there and that I still have the job now,” she says. “Since then, some people have graduated and the offers have been taken back. Worse, people who graduated after me, only a little younger than me, cannot find a job. People blame themselves, but it’s not their fault. It’s timing. I was lucky.”

Still, every time a major company has layoffs, everyone in her office talks about it and Du will catch herself worrying about the low prices, wondering how long the bust will last. Du is from Tianjing, a city in northern China, and she’s in the United States on a work visa. If she were laid off, she’d have to return home, and Chinese oil companies aren’t doing any better, she says. She’s thought about it, and even though she loves her job, she would probably go back to school to develop her skills so she can work in other industries if she needs to. “I think that’s fine, to change. In your life you should try different things,” she says. “Oil is here now, but it will be replaced one day. Maybe not tomorrow, but in 150 years it will be replaced and so one day we will have no jobs in this industry anyway, and we’ll all have to learn new skills and new things.”

Others are determined to stick with it. Bryan Printz, 29, is graduating next spring with a degree in petroleum engineering from UH, and has a wife and baby daughter. He hasn’t been able to get a single internship. He moved to Houston in 2007 from Detroit, intent on getting away from the crippling economic hardships of the Great Recession. He’s been making the rounds of different companies, going through the interview process. “I do well and I’ll be in the running, but then I don’t get the internship,” Printz says. “At this point I’m open to anything. You need experience with this kind of job, and I just want to go to work.”

Nobody knows when the industry will turn around. A meeting in mid-April in Doha, Qatar, between OPEC leaders and non-OPEC leaders to try to negotiate a freeze on the rate of oil production to stabilize the industry ended without an agreement. Forecasts call for oil prices anywhere between $30 and about $40 per barrel in 2016 and 2017, according to recent reports from both the International Energy Agency and the U.S. Energy Information Administration.

Eventually prices will probably go back up, and then they’ll go down, Jon Olson, a professor of petroleum engineering at the University of Texas, says. “We’re not going to be on the bottom forever. When the price is down, the transition that is happening now is the most painful part. It’s hard but it’s all part of the cycle.”

After his second layoff, Rinehart swore he was done with the oil industry, but now he keeps thinking of calling his friend and asking if there might be another oil field job available. Maybe it would bring only a few months of work and would end with another layoff, but he’d still be making more money, and at this point he knows how to handle a layoff. But he won’t get an energy degree if he goes back to school, he says. “The whole field is just too unreliable.” 

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