The oil and gas industry is facing a significant labor shift. While traditional thinking links job cuts to oil price crashes alone, the reality in 2025 is a little more complicated. Not just lower crude prices, but industry consolidation and technology adoption towards automation and AI are playing a key factor in reducing the employment workforce.
According to the Institute for Energy Economics and Financial Analysis (IEEFA), employment in the U.S. oil and gas sector has fallen from roughly 1.26 million to about 1 million over the past decade, with much of that shift happening within the last two years. Just looking at this year, major companies are making deep cuts. For example, companies like Conoco Phillips and Chevron both have advised of their plans to reduce their workforce by 20% potentially before the end of 2025. In Texas alone, upstream oil and gas have lost nearly 3,000 jobs in June and July, as reported from the Houston Chronicle. Globally, job cuts are accelerating and could hit levels not seen in the past three years
Reasons for the job cuts in oil and gas
What is driving all the job cuts? I would say many things, but below are my top four reasons.
1. Weakened Market Conditions
The fact is that crude oil prices remain under pressure. For example, U.S. rig counts have declined to their lowest levels since 2021. With lower prices, many projects are differed thus reducing the need for labor.
2. Consolidations and Efficiency Changes
Companies are merging assets, eliminating duplicate roles and streamlining operations. At the same time, many of the major job cut announcements we have seen are being followed by large acquisitions.
3. Automation and AI
While AI is still new in the public eye, these technologies have been at the forefront of processes for these oil and gas companies for a few years. Since AI has become exponentially more accessible, oil and gas companies can push it harder for its use.
4. Project Timing and Investment Shifts
As upstream spending drops, meaning the capex projects funding decline, this will cause many companies to slow manufacturing production, halt construction, or completely postpone any further development of those projects. This also means reducing the number of employees needed for any project.
Why the job cuts matter
Why does this matter? Simply put, the workforce composition is changing. The number of workers needed per barrel of oil is roughly half of what it was a decade ago. That means even if production stays flat or slightly rises modestly more, the employment numbers might not. While at the same time, automation and AI adoption roles keep increasing with demand. Those people that can adapt using their field knowledge to include Data/AI uses will stand out above the rest. The outcome on logistic services and the overall supply chain will be impacted as a prime result of the layoffs and belt tightening. It is basically a ripple back effect felt by all in the supply chain space.
It is not complete doom and gloom, though. While some jobs disappear, new ones may emerge mainly in digital operations and AI-enabled maintenance, including remote monitoring. The main question will be the timing, scalability and worker mobility.
What to watch for
What should we be watching for in the coming months and year?
- Companies that announce large capex cuts or merger and acquisition (M&A) deals which will follow with a round of workforce reductions.
- The pace of AI and digital adoption will accelerate. At some point, it will reach a head to where the job impact becomes sharper.
- Service industries such as equipment, maintenance, and logistics might face a second wave of job cuts as funding for these capex projects continue to tighten.
The oil and gas workforce is at an inflection point. Cost pressures, automation and AI are rewriting how the industry operates. The next few years will determine whether companies and the people that work there can evolve fast enough to keep up.
