For the tens of thousands of contract workers operating in the UK Oil & Gas industry, the COVID-19 crisis may dramatically impact their livelihoods after the price of oil plummeted to a record low in the United States earlier this week.
The lack of demand for oil saw prices turn negative for the first time in America, to minus $38 per barrel - a result of oil producers paying buyers to take it off their hands as fears grow about storage capacity.
While reports say US prices have now recovered “close to a positive figure”, the effect of COVID-19 on the Oil & Gas market has been felt globally. Closer to home, in the UK, the price of a barrel of Brent crude oil has fallen to an 18-year low, to less than $20. Experts have also warned the UK market could follow a similar path to the US if demand is destroyed on these shores, as it has been in America.
Already, the slump in the oil industry, not helped by what the Financial Times reported as an ongoing “price war” between Russia and Saudi Arabia, has seen the number of idle oil rigs in the North Sea increase.
One industry commentator has been quoted saying “the whole of the North Sea has gone into meltdown again”, in reference to difficulties faced by the market several years ago. Another said “we are heading into a crisis behind a crisis”, alluding to the implications that a drop in prices may have on the 300,000 jobs the industry supports in the UK.
This slowing down in activity is predicted to result in UK operators reducing their spend by up to 30% this year, as Oil & Gas companies tighten their belts. Needless to say, this has a knock-on effect on the demand for workers, whether contract or permanent, onshore or offshore.
Reports suggest Oil & Gas businesses have already made redundancies in reaction to the pandemic, choosing not to furlough employees via the Coronavirus Job Retention Scheme (CJRS) for fear that the damage inflicted by COVID-19 will last longer than the help available through this initiative.
As a result, industry trade body, Oil and Gas UK (OGUK) has urged the Government to intervene and protect the industry, that contributes £24bn to the UK economy each year.
Commenting on the drop in UK oil price, OGUK’s Chief Executive, Deirdre Michie, said: “There’s no getting away the fact that this situation is a body blow for an industry already creaking under the strains of the impact of COVID-19 and sustained low commodity prices.”
“The dynamics of this US market are different from those directly driving UK-produced Brent, but we will not escape the impact. Ours is not just a trading market; every penny lost spells more uncertainty over jobs, our contribution to public services and to the just transition we all want to see.”
“OGUK will be pressing the case for a COVID-19 resilience package to Governments in the coming days which will focus on protecting the supply chain, jobs and our ability to continue to reposition ourselves for the future.”
All of the above paints a worrying picture for Oil & Gas contractors who, like the rest of the population are living in unprecedented times. However, when demand for oil does pick up again after lockdown measures are eased, it’s vital that independent workers are poised and ready to seize the opportunities that are expected to come their way.
With over 25 years’ experience, Qdos provides a range of insurance for contractors and the businesses that engage these independent workers. For more information regarding insurance for Oil & Gas contractors, please click here.
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