Yves here. The US shale biz is having a class warfare problem. It isn’t the usual “We can’t find enough new hires” being the result of “We aren’t offering good enough pay.” The industry is having trouble finding enough young workers to replace greybeards for reasons that in most cases can’t be solved by pay. First, many new and recent grads want nothing to do with an environmentally destructive industry. Second, the oil and gas industries are cyclical. Many have wised up and don’t want the layoff risk. And some may also recognize that shale will go into long-term structural decline, and they don’t want to wind up in the work version of musical chairs as employment levels fall over time.
The article describes how incumbents are experimenting with AI so as to get by with less labor. However, one gets the impression that these initiatives, even when successful, are not having that much overall impact.
By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice
- The U.S. shale industry is facing a critical talent shortage as skilled workers retire, younger generations avoid oil careers, and labor costs rise.
- Despite increased automation and AI-driven efficiencies, the Permian Basin and broader shale sector still struggle to fill essential technical roles, affecting productivity.
- U.S. shale production is nearing its peak, and while output may plateau rather than sharply decline, ongoing workforce shortages threaten future stability and growth.
The U.S. shale industry faces a structural shift in production and productivity while it has been grappling with a shortage of skilled workforce for years.
Booming U.S. oil production may be nearing its peak, according to industry executives and forecasters, and it isn’t just because oil prices are dangerously close to breakevens.
The perennial talent crunch is weighing on the US oil sector. Rising labor costs and a shrinking talent pool add to the concerns in the industry that is strongly supported by the Trump Administration to “drill, baby, drill” and ensure America’s energy dominance.
A large part of the skills gap in the oil and gas industry, including in America, is a generation gap. Boomers are retiring, Gen X want stability that the boom-and-bust oil cycles cannot provide, while Generation Z, despite growing up with technology, are generally averse to committing to industries that conflict with their beliefs, despite the higher wages.
The lower number of geologists and experienced engineers entering the U.S. oil and gas industry has been a concern for producers and service suppliers for years now. These concerns have not abated with the increased automation and the use of AI and other sophisticated technology to boost efficiency and productivity. At the end of the day, the decision-making powers lie with the experienced and skilled workforce.
Moreover, automation and robotics can perform repetitive functions, leaving more time for people and teams to focus on high-priority tasks.
Talent Crunch
For example, supermajor Chevron is testing one AI-driven approach to inspections in the Permian.
Near Midland, the heart of the Permian basin, Percepto and Chevron have recently reached a six-month milestone to evaluate the use of the drone company’s AI-powered remote inspection capabilities.
Over the first 90 days of deployment, Chevron saw work hour savings that allow personnel to prioritize activities, cost-efficient and increased monitoring frequency at remote sites, and faster issue detection, the drone company Percepto said.
“This not only keeps our workforce safer but also allows us to direct resources where they can make the biggest impact,” said Kerri Harvey, Chevron’s Midland Basin Operations Superintendent.
“Leveraging automation enables our teams to spend less time on the road and more time focusing on high-priority tasks.”
It’s the skilled workforce that will focus on high-priority tasks, but the Permian struggles to fill these roles.
Many employers face a shortage of technical expertise in fields such as petroleum, electrical, and mechanical engineering, Willie Taylor, CEO of Workforce Solutions Permian Basin, told PBO&G, the Permian Basin Petroleum Association magazine, earlier this year.
Homegrown talent in the Permian isn’t enough to keep up with demand, while new hires from outside the basin are often deterred by the high cost of living in Midland and Odessa—the shale industry’s centers in the region.
Post-Peak Shale Will Need Skilled Workforce, Too
Even if current estimates of slowing and stopping growth in total U.S. oil production by the end of the year pan out, skilled talent will be needed for years to come to fill the high-demand jobs in the sector.
Yet, with an ageing workforce and fewer employees willing to join the industry, the problems are mounting for the shale patch.
U.S. crude oil production is set to decline from an all-time high of 13.5 million barrels per day (bpd) in the second quarter of 2025 to about 13.3 million bpd by the fourth quarter of 2026, due to decreasing active drilling rigs and declining oil prices, the U.S. Energy Information Administration said in its June Short-Term Energy Outlook (STEO).
With fewer active drilling rigs, the EIA now forecasts that U.S. operators will drill and complete fewer wells through 2026. On an annual basis, the administration expects total U.S. crude oil production to average a bit more than 13.4 million bpd in 2025 and a bit less than 13.4 million bpd in 2026.
Some big names in the industry also see peak shale output on the horizon.
“As you know that most of the shale basins now have either plateaued or starting to decline, except for the Permian,” Vicki Hollub, President and CEO of Occidental Petroleum, said on the Q1 earnings call.
“If companies continue to talk about dropping activity levels, I think the Permian could plateau sooner than we expected – and we had expected the Permian to continue growth through 2027,” Hollub added.
Ryan Lance, the chief executive of ConocoPhillips, said on the company’s earnings call that at $60 oil, “the folks that don’t have the kind of cost of supply sitting in their portfolio are going to find themselves cash-strapped and returns-strapped.”
“Obviously, the balance sheets are in pretty good shape across the industry, better than we were in the last downturn, but you’ll see a lot of activity cut back,” Lance added.
Peak shale output, whenever it occurs, does not mean a steep decline afterwards—it would rather be a long plateau of leveling off of U.S. crude oil production in which the slowdown in shale would be partly offset by rising output from the U.S. Gulf of Mexico, executives and analysts say.
U.S. oil production will not fall off a cliff, but the ever-shrinking pool of skilled employees in the industry could further challenge the shale patch with rising labor costs and drilling times.
Maybe those employers can make a deal with Trump. Have him turn over emigrants seized by ICE to them and make them an offer that they can’t refuse. Work for five years in their oil fields with a Green Card waiting for them at the end of it – or risk deportation to some place in Africa or east Asia. It’s a stupid enough idea that it might actually happen.
While I understand that your proposal is not serious, my concern is that the Trump Administration would think it is a good idea. We already have a lot of prison industries based on cheap convict labor, why not tap into the undocumented population, its cheaper than incarceration, and you can bill them for government monitoring, etc. Plus, the Administration remains in control of the use of the labor supply. If ICE controls the labor supply, they can outsource to the highest bidder, not in the sense of a public bidding process, but which industries buy the most influence in the Trump admin.
How many of those people detained by ICE are oil, electrical, or mechanical engineers — the qualifications that the oil firms seem to desperately need according to the article?
Many MBA and HR people view and name employees and workers as “resources” — but, actually, they are not fungible.
Yes. While there are ‘grunts’ at any drill-site, the work is supervised by college degree engineers/geologists. I have a hard-rock geologist friend who traveled to the Permian Basin to finish out his career with some bigger money. The multiple sites he supervised created enough travel that motel life gave him health issues; and he finally retired. I imagine FPV drones are now doing much of that travel/inspection activity.
In its most recent Short Term Energy Output report by the EIA it forecasts a stable oil production for 2025-2026 at about 13.3-13.4 Mb/d with a slight decline from a recent 13,5Mb/d peak. The report cites a larger than expected decrease in active drills in May. I believe that hiring difficulties might impair growth rather than resulting in more or less sharp declines which are probably related with oil price signals. What this article describes might indeed be an important long-medium term factor but I see this as a symptom rather than a driver of results. Might it be an early indicator of what to come?
The article glosses over another key factor… who in the heck wants to live in the Permian Basin or any of the major shale oil fields? At best you might be able to drive to “civilization” within an hour and even then you’re still in fly-over country. Any, even medium sized, city life is still probably another 1-2 hour drive.
There was a time where lots of young people could buckle down and live in these remote places for a year or two or three and then walk away with a fist full of saved cash. But there is a dwindling group of native young people who are not already up to their eyeballs in debt. Why go to the Permian Basin when you can be the same debt slave somewhere that you can at least occasionally enjoy yourself.
On top of that they are glossing over the impending decline in shale and it could be sharp…
“Peak shale output, whenever it occurs, does not mean a steep decline afterwards—it would rather be a long plateau of leveling off of U.S. crude oil production in which the slowdown in shale would be partly offset by rising output from the U.S. Gulf of Mexico…”
Yes, overall production might plateau, but this assumes increased production from the Gulf, which may very well be true, but it also means some flow of those jobs from the Permian Basin (or god help you if your in ND) have to migrate to the gulf which is 600 miles to the beach line. And once there you’ll be deposited onto a rig in the middle of the gulf.
If you want a young person or even anyone to give up what their asking, then the equation needs to be ending up reasonably net positive, netting out at zero isn’t going to get you sign-up. I know these jobs pay well, but the non-monetary costs are large and so many young people are already in the hole with personal and student/college debt.