What Oil Companies Should Expect Once the Market Rebounds
While hope for healing and restoration exist, with good degree of confidence one can allude to the fact that no condition is permanent. Therefore, it is realistic to say that the global oil glut laden with low prices which has torn the economic fabrics of companies and families apart will not linger forever. Soon, there will be healing and the market will rebound significantly as has always been the case in the history of the oil industry. Definitely, sooner or later the market will come back to life, but there are things that the industry will come to live with which may change the market dynamics again:
Shortage of Experienced Human Capital
The low prices of oil significantly led to drop in revenue and wiping off profits for many oil companies. It became very stringent for companies to raise funds for exploration or production. The financial difficulties and reduction in activities made companies to lay off many of their staff. Some of the personnel that were laid off have garnered more than 20 years experience in the industry. The labor market has been overwhelmed with some of the people laid off from the oil industry looking for jobs in other industries and many are pushing to start off their own businesses in different sectors. For example, recently, it was on news that the government of Scotland was working to retrain some oil company workers laid off to become teachers. The time oil market will rebound, the industry will be in lack of experienced workers and this could affect productivity and quality.
Picture Source: VAALCO Energy
2. Competition will become rife
Competition will become rife within the industry once its rebounds. Companies would start to compete over resources and to reposition themselves in the market. Companies that cannot tremendously reduce cost in both capital and operational expenditures and be highly innovative in their work processes will lose out. While the market is still tough and unpredictable, high performance companies should continue to build strategies for innovation and drastic cost reduction in order to remain competitive.
3. Knowledge Based Companies will win the race
In order to remain afloat many oil companies have not only laid off thousands of their work force, they have began to sell some of their assets. Companies have gone far towards saving their finances by also cutting down cost of coffee – to the extent that some companies have decided not to offer free coffee to their employees. There are companies that have stopped their staff from attending outside industry trainings and conferences. There has always been this ubiquitous but real saying that happy employees treat customers’ right and that one of the attributes of a high performance organization is that it is knowledge-based. Employees morale start to wane and knowledge shrink when they are been denied opportunity of enriching themselves and interacting with their peers. Therefore, companies that deny their employees of attendint training or conferences beyond the confines of their organization and interacting with their industry peers are caging them from gaining more knowledge of the industry trends which may help the quality of their works.
With the waves still blowing , how do you think that oil companies will adjust once the market rebounds and what do you think might be the challenges companies could face?