Jump in Rig Count Should Be a Positive for Jobs


 
Author: Walter Kurtz
Location: Tokyo
Date: 2014-03-18

In another sign of improving momentum in the US economy, the active oil and gas rig count started rising in recent weeks. This is after a major decline in 2012 and a stagnant 2013.

Source: Baker Hughes

A big part of the drop in 2012 was due to the sharp decline in natural gas prices. Production in certain situations became unprofitable - particularly for some of the more leveraged projects.

Source: barchart

Now that gas prices have firmed up and likely to stay that way, some of the extraction projects make sense again - especially as technology improves. Should conversion from gas to liquids become less expensive, rig count will increase further.

Like it or not, oil and gas jobs tend to be high-paying - which should help with US wage stagnation. The industry also generates a decent job multiplier effect through the various peripheral sectors that support it (housing, manufacturing, transportation, etc.) If sustained, this jump in rig count could therefore provide a meaningful contribution to the US economic expansion.

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