As demand for fossil fuel plummets, education, job creation and other support is critical to save millions of oil industry employees and their communities from collapse.
Since worldwide coronavirus-related lockdowns began in early February, the global demand for oil has evaporated. This huge drop in demand, coupled with an already overinflated supply, has depressed oil prices to historic lows. There has been justifiable attention on how to use this moment to help bolster low-carbon transitions. However, it is also important to address the negative impacts of this much-needed low-carbon transition on the livelihoods of the world’s millions of oil workers and their communities.
“In 2016, when the oil prices were low, it badly impacted the oil industry workers,” says Jorge Gómez Lara, who works at Pemex, the Mexican state oil company. “Thousands of contractor workers were laid off, and oil-dependent towns like Ciudad del Carmen in Mexico witnessed massive unemployment, resulting in rising crime rates. This is happening again in the current oil crash.”
Oil-exporting emerging economies such as Mexico, Kuwait, Nigeria, Saudi Arabia and the United Arab Emirates have all been severely impacted, facing revenue losses and record layoffs due to production cuts. Signs of trouble are emerging from the Middle East to the Americas. For example, in the last few months, regional news reports have told stories of oil industry workers losing jobs, facing salary cuts or experiencing delays in payment of wages.
Recent reports highlight the impact current and future job losses will have on millions of people worldwide, particularly those in the exploration and production segment, which forms the bulk of oil industry jobs in oil-exporting emerging economies. This could have grave repercussions for workers and their families due to the lack of social security measures such as unemployment insurance in many of these countries. Social breakdown may well follow.
In the Global North, experts have been vocal about the need for governments to implement “just transition” plans for oil workers — plans that would help such workers move away from fossil-fuel industries to other industries, including those that support a low-carbon future instead. However, this has gone largely undiscussed in emerging economies. Given the significant oil industry employment in oil-exporting emerging economies and their associated vulnerability going forward, policymakers in such countries must start considering what is needed for just transitions.
In many oil-exporting emerging economies, the scale of oil-industry and related employment is enormous and is typically regionally concentrated. For example, in Mexico, Pemex employs 130,000 people directly, from which flows indirect employment for a further 500,000 people. This means that nearly 2 million people in Mexico — the 630,000 workers, each with three or four family members — are tied to the oil industry.
Moreover, in such oil-dependent countries, large numbers of oil-related jobs are concentrated regionally in “oil towns” that were built around the local oil industries. In such towns, nearly every person relies on the oil industry directly or indirectly by running shops and local businesses that rely on oil workers’ spending. In such towns, the loss of high-paying oil sector jobs typically has enormous knock-on effects for wide swaths of the economy.
Planning and implementing just transitions will not be easy, even in rich countries. A lack of alternative employment opportunities, challenges in the provision of appropriate retraining, and other socioeconomic obstacles have together kept opportunity sparse. Therefore, it is imperative that governments in emerging economies start planning for a just transition now.
It’s also important to not let workers’ legitimate concerns be co-opted by elites with vested financial interests in the status quo as a way to block energy transitions — something that evidence suggests has happened in previous fossil fuel industry declines.
How to Transition
Leaders in oil-exporting emerging economies should view the current pandemic-affected situation as an indication of what a low-carbon world could look like. Officials could create transition task forces with a mandate for long-term planning; such efforts have been made in Scotland. Planners should start by first identifying cities and villages that are particularly vulnerable to energy transitions and future oil sector contractions, and then engage extensively with workers, unions, local governments and other relevant stakeholders to develop plans to diversify the local economy and create new jobs.
Governments and researchers in some countries have in recent years developed approaches to support job transition for coal workers, some of which could be replicated for oil-industry workers. National and subnational governments could promote new industries for creating local employment opportunities in sectors ranging from clean energy to tourism and manufacturing. Colleagues and I recently found that it is technically feasible to create local solar jobs for some out-of-work coal miners in many coal mining areas in China, India, the U.S. and Australia. These kinds of studies could be replicated for oil industry workers in other vulnerable regions.
Starting now, governments could also make critical long-term investments in education by creating new universities in oil-dependent regions. The creation of 22 new universities helped coal-mining dependent regions in Germany diversify to a knowledge-based economy. Another important aspect of just transition is that workers transitioning to new jobs might require retraining to acquire new or additional skills. Governments’ retraining efforts should align with the job requirements of emerging regional employment opportunities.
One way to tackle these imperatives could be the creation of worker transition centers that provide training and match workers with opportunities in towns and villages vulnerable to decarbonization. Last year in Canada, the federal government’s Task Force on Just Transition for Canadian Coal Power Workers and Communities recommended the creation of such centers because in past industrial declines they played an important role in sharing information and helping workers to find new jobs.
Of course, not all places can attract new industries, and some workers may be more mobile than others. A just transition task force should consider these realities when planning.
Implementing a just transition for oil workers has many challenges with which authorities in emerging economies have not yet begun to grapple. However, the current drop in oil foretells the vulnerable future that millions of oil workers will likely face.
Sooner rather than later, governments of emerging economies must support a just transition for workers and their communities.
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Teaser photo credit: By Joshua Doubek – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=27296189