The recovery in America’s oil and gas sector is underway. But companies say hiring workers to support the uptick in demand is getting trickier—and more expensive.

That was the key takeaway from the Dallas Federal Reserve’s latest energy survey, which was released Sept. 29.

While the survey showed upstream activity continued to recover in the third quarter, more than half of the oilfield services executives who responded said they were having trouble finding employees.

“Business activity grew at a solid clip this quarter, and survey responses generally pointed to continued improvement in the sector,” said Michael Plante, senior research economist at the Dallas Fed. “However, cost pressures have been increasing, with many firms reporting rising input and labor costs.”

Oil and gas producers and (especially) service providers laid off employees en masse last year as the pandemic sent prices through the floor. But now—as with many other sectors across the U.S. economy—they are having difficulty luring back skilled workers.

“We are seeing a slight improvement in business activity but are struggling to hire enough qualified drivers with a commercial driver’s license,” one survey respondent said.

Of the oilfield services executives surveyed, 51% said they had struggled to hire workers during the past three months. Of those, 70% blamed a lack of qualified applicants. Thirty-nine percent said workers were looking for too much money.

“Wages are up 20%, and companies are poaching employees from competitors. We are finding it difficult to increase prices to match our increase in costs,” according to one response.

The shortage is contributing to a sharp rise in costs, with the index tracking inputs among services groups hitting a record high. Of 47 firms surveyed, just one said input costs had dropped.

Services costs have been depressed for years. Now it seems they are about to provide another source of inflation in oil prices.

This article is an excerpt of Energy Source, a twice-weekly energy newsletter from the Financial Times. 

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