The Fossil Fuel Sector, Subsidies and Job Creation: Sorting Fact From Fiction

The energy industry is undergoing a fundamental shift. Exactly how quickly the world will adopt clean energy is still unclear. One significant argument for keeping society’s fossil fuel love affair going is to protect jobs in the conventional energy sector. But how safe are those jobs really?

A new analysis shows that employment in the fossil fuel sector will drop 20 to 30 percent, regardless of the transition to renewable energy. Also, many of the oil industry jobs that were lost in 2020 due to decreased demand from the pandemic are not likely to return. The following are rebuttals against the argument that fossil fuel companies support high-quality jobs — which, together, make the idea of subsidies to help an ailing industry even less appealing.

Robots could replace oil and gas workers

Recent analysis from the research firm Rystad Energy highlights that robotics could replace hundreds of thousands of oil and gas workers globally by 2030. This move would reduce drilling costs by several billion dollars and in turn shrink the size of both onshore and offshore crews. If the United States did reduce its staffing needs according to Rystad Energy’s estimates, this would equate to 140,000 lost jobs.

Learning from the ailing coal industry

The coal industry has experienced a long decline in employment over the last century. At its peak in 1923, there were 863,000 coal mining jobs. As of 2020, there were only 40,000 jobs.  Despite former President Donald Trump’s promise to “bring those miners back,” employment and production actually declined during his presidency. Coal mining jobs tend to be highly concentrated in certain areas in the U.S. — and most of the activity is taking place in Wyoming, where the industry is beginning to face more challenges. Thus, the effects of the industry's decline are especially pronounced in these communities.

Who is the culprit causing declining coal employment since its heyday? Mechanization makes the industry far more efficient and safer than when workers used pickaxes and pushed carts. The rise of natural gas and, to a lesser extent, renewable energy have curbed demand for coal. Barack Obama-era policies that were largely reversed during the Trump administration slightly furthered its decline.

Sadly, the waning of the coal industry has taken its toll on workers. From 2011 to 2016, demand for coal tanked, both internationally and domestically. Three of the four largest U.S. coal companies declared bankruptcy, shedding hundreds of millions in retiree pensions and healthcare benefits.

Further fossil fuel industry layoffs

According to the nonprofit Bailout Watch, 77 oil and gas companies received $8.2 billion in pandemic-related tax breaks yet still laid off 16 percent of their combined workforce of 58,000 employees. The layoffs are due in part to automated operations reducing the need for workers.

Jobs in renewable energy

The Joe Biden administration has been looking to the renewable energy sector to create high-quality jobs as jobs in fossil fuels phase-out. Jobs in renewable energy tend to be well dispersed throughout the country and not so concentrated in specific areas, unlike coal mining jobs. As of 2020, there are 523,000 employed in the renewable energy sector, and the solar energy industry employed 345,000 in the United States, with significant anticipated growth. These are encouraging numbers, but there are some issues to keep in mind.

Although construction has traditionally been difficult to automate, the solar energy industry is also experiencing some digitization and automation within construction and manufacturing. 

One criticism of the renewables sector is that women and people of color are underrepresented, according to a 2019 study. As with many industries in the U.S., the discrepancy is structural, as one Inside Climate News report from last summer explained. Bottom line: This is still a very white and male-dominated industry. “The overall solar workforce is 73 percent white, and women and gender non-binary people make up less than 28 percent of solar workers,” TriplePundit’s Mary Mazzoni wrote that same year.         

Fossil fuel subsidies

According to conservative estimates by the Environmental and Energy Study Institute, direct subsidies and tax benefits to the fossil fuel industry in the U.S. total about $20 billion annually. Of this, 20 percent goes to coal and 80 percent to petroleum and natural gas. According to the IMF, fuel subsidies disproportionately impact the wealthiest while providing little value to the bottom quintile of the population. Thus, fuel subsidies can exacerbate income inequalities.

Historically, these subsidies were intended to lower production costs and ensure domestically extracted energy sources. However, many of the external costs of fossil fuels, such as their impacts on health and the climate, are not included in such figures. External costs can be significant and more challenging to quantify. Besides, the oil industry knew about the impact of burning fossil fuels on human health yet aggressively lobbied against regulations. A common plug for fossil fuel subsidies is the need to protect industry jobs, but this has become highly questionable.

Subsidies have had a large impact on the availability and cost of fossil fuels. Keeping their prices artificially low by ignoring environmental and social costs, such as climate change and acid rain, leaves a significant burden unaccounted for. Fossil fuel subsidies also enable overconsumption, further fueling the issue.

Historically, humanity has switched fuel sources many times throughout its existence. The waning use of coal and the adoption of renewable energy show a slow but needed shift. Finally, peak oil consumption might have also already passed, according to a September 2020 BP report.

Although fossil fuels’ short-term benefits are hard to deny, such as their immediate impact on productivity and economic growth, there are few positive long-term attributes. If even their ability to create decent jobs is in question due to automation, the glaring external costs become even harder to ignore.

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