Oil Price Plunge To Hit Thousands Of Contractor Jobs

Oil and gas contractors need to move to protect their finances as the industry is in tatters after plunging oil prices, companies under threat and currency devaluations.

The price per barrel has slumped below $35 a barrel – the lowest for more than a decade and looks set to fall further as oil producing countries keep pumping out a commodity no one wants to buy.

As Saudi Arabia and Russia refuse to cut output in fear of losing market share, the tension is aggravated even further by Iraq and Iran stepping up production after years in the doldrums.

Add a lack of consumption by major users China and India and the industry has a toxic cocktail of economic woes to sort out.

Thousands of jobs are already lost and thousands more will follow as exploration firms shelf projects.

Collapsing currencies

For contractors paid in US dollars, the favourite denomination for offshore contracts, the currency is strengthening while local currencies have seen a rash of devaluations.

This week, the Angolan kwanza slipped more than 15% to an all-time low of 158 to the dollar.

Azerbaijan has unpegged from the dollar, and a 33% slide in value followed.

The South Sudan Pound collapsed by 85% in 48 hours.

Central banks in Saudi Arabia and Nigeria are likely to follow suit as their currency valuations are now out of kilter with those of any other oil producing nation.

Mots Gulf States have dollar-pegged currencies that are now considered 20% over valued.

The plunging value of local currencies is likely to boost inflation and reduce contractor spending power as the day to day cost of living increases.

Emerging economy problems

The perfect storm of plummeting oil prices, a slowdown in China and a strengthening US dollar is ravaging emerging market economies already hit by slowing GDP and increasing inflation.

Oil and gas is not the only sector affected.

Mining companies have seen their share prices drop as demand falls for gold, copper, iron ore and other industrial commodities.

Many were consumed by the giant Chinese industrial engine, which has slowed considerably.

With remarkable foresight, the Chinese government has spent the past year or two stockpiling many of these commodities and is unlikely to suffer as much from the demise of the markets as other emerging economies.

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