Finding an open table in Pappy’s Coffee Shop is a tricky business here most of the early hours of the morning.
The little restaurant on Rosedale Highway opens at 4:30 a.m., just in time for workers to have a bite to eat before heading to the oil fields. But on a last Tuesday at 6 a.m., many tables were empty. About an hour later, more customers arrived, mostly high-level oil companies, retirees or farmers.
Roger Lake, a regular, scanned the restaurant.
“I don’t see any oil field workers,” he said.
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Lake knows the industry well. The 76-year-old Bakersfield resident has worked in the oil business since 1959 and is still a consultant, despite falling prices encouraging retirement.
“All you can do is withdraw and wait,” he said. “It could be a year, it could be two years. Who knows?”
Bakersfield is no stranger to the booms and busts of the oil industry. But this time the break-in is different.
Two years ago the price of oil was $ 100 a barrel. Since then, oil producers have pumped more crude oil than the world needs. Prices began to fall and have not stopped, hurt by the recent slowdown in the Chinese economy and a stronger US dollar. Iran’s return to the market can only add to the tide.
On Friday, West Texas Intermediate Crude Oil – the benchmark for North America – closed trading in New York at $ 31.42 a barrel. Brent crude, used at the price of international oil, traded at $ 34.41 a barrel in London.
Kern County’s wells account for approximately 70% of the state’s oil production. Up a field in Bakersfield.
(Al Seib / Los Angeles Times)
In a region where the two main industries are oil and agriculture, the global collapse in oil prices feels personal.
At its center is a surprising fact: Bakersfield and the rest of Kern Counties produce more oil than any other county in the country – not anywhere in Texas or North Dakota – according to the Kern Economic Development Foundation, a workforce development organization. The oil pumped from the county’s wells accounts for about 70% of the state’s oil production and 10% of US production.
In 2014, Kern County had roughly 50,000 energy-related jobs, a broad number that, according to the foundation, includes services and other businesses beyond drills.
At the end of the year, companies had started laying off workers. Then 2015 brought even more pain.
Nationwide, oil-related jobs were cut by 104,514 last year due to falling prices, according to Chicago-based consulting firm Challenger, Gray and Christmas Inc., an additional 17,178 people were laid off last month.
Several companies like Chevron Corp. and Halliburton Co., which operate in Kern County, announced widespread layoffs.
As of December, 9,700 people in Bakersfield were working in oil and gas drilling and production jobs, down 18.5% from a year earlier, according to state data.
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According to Baker Hughes, a Houston oil field service company, only seven rigs were drilling new wells in California at the end of January, up from 16 the previous year.
According to the US Energy Information Administration, California ranks third in the country in crude oil production, second only to Texas and North Dakota.
Les Clark, executive vice president of the Bakersfield-based Independent Oil Producers’ Agency, has weathered four oil price drops in his career and said the recent slump hit the mom and pop operators he represents particularly hard. Oilfield service providers, including equipment suppliers and maintenance companies, as well as contractors and consultants, got the worst of it.
“I just hope a lot of my guys will be able to hold out,” said Clark. “This is serious business.”
San Joaquin Bit Service Inc. laid off 25% of its employees. The oil field service company DMW Industries Inc. only has 10 sales representatives of the 85 in 2014.
“This happens every five to seven years,” said David Miller, president of DMW Industries. “But this is the worst I’ve ever seen and the longest I’ve ever seen.”
The Petroleum Club on the 12th floor of Bakersfield’s tallest building has seen its membership decline.
(Al Seib / Los Angeles Times)
The downturn hit the city and county finances.
For the fiscal year ended June 30, 2016, Kern County expects to collect taxes of $ 103 million from the oil and gas industry, compared to $ 143 million in the previous fiscal year. The estimated value of all Kern County real estate for the fiscal year beginning July 2015 was $ 89.2 billion. That represents a 9% year-over-year decrease that was directly related to the decline in oil and gas prices, according to the Kern County’s appraisal registrar’s office.
“For the county, specialty, school, and group revenue that depends on the property tax dollar, it is worse than last year,” said Lee Smith, assistant valuer for Kern County. “You can see that much of the local economy depends on oil. It’s far reaching and we’re not sure where it will end. “
Sales tax revenues have also declined as companies cut the equipment they buy.
This has forced the city to make budget adjustments, cut down on some planned capital projects and put in place a limited hiring freeze, said deputy city administrator Chris Huot. Hotel tax revenues have declined as fewer oil industry travelers visit Bakersfield, City Manager Alan Tandy said.
“We’ve seen the cycle before,” he said. “The pace at which it came was unusual.”
The decor at Pappy’s Coffee Shop is a nod to the area’s oil industry. Bakersfield and the rest of Kern County produce more oil than any other county in the country.
(Al Seib / Los Angeles Times)
Everything in Bakersfield is linked to oil. A silver water tower that stands over the Bakersfield High School campus is adorned with “Driller Country,” a reference to the school’s mascot. Pumpjacks sway behind chain link fences in parking lots and near parks.
Even Pappy’s decor is a nod to the oil industry. In addition to framed photos of oil tankers, derrick towers and pumpjacks, there are old-fashioned metal signs for JP Oil and Getty Oil Well No. 12. A few taxidermy buffalo and zebra heads break up the homage.
“Everyone can feel it,” said Jason Mundorf, San Joaquin Bit’s sales director, as he sat in the diner. “We know it will eventually recover. I try to be optimistic – it can only get better. “
Even the exclusive Petroleum Club on the 12th floor of Bakersfield’s tallest building has seen its membership decline. About three years ago, the private social and business club reached its peak with 1,140 members. Now it’s about 850, said club president Dave Plivelich.
The club, which features chandeliers, floor-to-ceiling windows, and an ornate wood-paneled entrance, has long since abandoned its membership limit for the oil industry and added other professions such as medicine, insurance, and marketing to its ranks.
Aside from the immediate pain, industry insiders are concerned about what will happen when the downturn ends and oil companies recover. Talented employees may find work elsewhere, such as Texas or Colorado, or may be leaving the industry.
In the meantime, some companies are adjusting their business to make money elsewhere. Oil drilling companies like San Joaquin Bit are often turning to water drilling, a lucrative prospect amid the drought. Released field workers find work in construction or with the installation of solar modules.
“There has to be diversity,” said Clark of the Independent Oil Producers’ Agency. “You have to keep people working.”
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Chad Hathaway’s father warned him not to get into the oil industry and instead urged him to consider a career in government with a steady paycheck. But Hathaway said he always respected his father’s job and the work ethic of oil workers.
At 39, he owns Hathaway LLC, a Bakersfield oil producer that is taking over old wells and refurbishing them with newer technology. This makes him the fourth generation of his family to enter the industry.
He was forced to fire people, cut wages and cut working hours.
“We have to build muscle for a year,” said Hathaway. “Yes, do it.”
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