Massive Job Losses in the Energy Business - what does it mean?

Having drilled oil wells in the North Dakota in the 1980s and then becoming an energy analyst for several mutual funds and lecturing about the industry, I am sensitive to the current condition of the energy market.  So, let's start with the energy jobs loss recently published in the StarTribune of 120,00 people (exclusive of the 3 largest coal companies all in bankruptcy proceedings).  While there maybe people applauding the shrinking energy industry, the job losses are not minimum wage positions.  These jobs paid well because the work is hard, dangerous and long hours in remote places far away from families.  These jobs pay anywhere from $80,000 to $200,00 for offshore petroleum engineers and geophysicists.  Because the job market is dominated by the lower end - oil truckers, water haulers, rig hands, oil field services employees, let's use $100,000 as an average salary.  Multiplying the 120,000 job losses by the $100,000 in lost wages is roughly $12 billion in lost wages.  Every MBA or CFA student studies what a multiplier effect is.  Basically the multiplier effect is the injection of these wages which leads to more spending and creates more income, more spending, more income - a circular flow.  The multiple effect refers to the increase in final income arising from any new injection of spending.  Suffice to say, the multiplier has a savings component.  Assuming that a consumer saves 20% of each new dollar (definitely on the high side), the multiplier is 5 times.  That means that for every $1 increase in income, $5 new dollars of income are created.  This can go into reverse, if savings are increased by the individuals, increase in taxes, or job losses.  So the $12 billion in lost wages becomes $60 billion ($12 billion x multiplier of 5).  If the multiplier is 10 (a savings rate of 10%, still too high for US savings rate), then the negative impact is $120 billion.  That means that state governments lose $12 billion in tax revenues, assuming a 10% state income tax rate.  The Fed losses $30 billion in tax revenue, assuming a 25% federal income tax rate.  And we have not talked about the coal sector, which is in a death spiral.  The three largest coal companies in the US are in bankruptcy.  Add another several 10s of thousands of employees and their multiplier effect.  These are seriously large losses of incomes and tax revenues, not being made up from the gains in renewable energy job creation.

How does this bode for the future?  I am a Colorado School of Mines (CSM) graduate, a petroleum development geologist, and energy economist and analyst,  I keep an eye on the anecdotal stories of CSM graduates, friends in the industry, trends from my discussions with energy company executives, college students soliciting advice from me and economic statistics, I represent the last large supply of hydrocarbon energy specialists.  The over 50 year-old demographic represents about 60% of the total energy specialists (geologists, geophysicists, engineers, land people) in the industry.  The current trend of graduating seniors is moving away from the hydrocarbon sector.  What this means is that this cycle will result in a massive loss of a knowledge base that is not being replaced.  

What does this mean?  It means that the US had better move with lightning speed to replace this expertise with solar and wind expertise, or cold fusion or something else, faster than it is currently being added.  Because with coal consumption down from 50% to 39% (EIA) of fuel consumed to generate electricity, nuclear at 20% (also under continued pressure), hydropower at 10% (also under pressure to be dismantled), natural gas increasing from 20% to 30% (basically replacing coal's decrease, but also under pressure), we will need solar and wind to be deployed faster (I like tidal for the East, West and Gulf Coasts, solar for the Southwest and Front Range, wind and solar the Central and Midwest).  We are pushing for consumption of renewable energy at a faster rate than supplying of renewable energy.  This is a problem.

Another problem is that both solar and wind are intermittent and interruptible energy sources.  A big push is being made to develop batteries to store these energies in the off-peak to be deployed at peak power demand, but there is no talk about the source of the battery materials - lithium.  The building of Elon Musk's lithium-ion gigafactory to supply those Teslas and what he hopes to be micro grids of homes that are interconnected to one another, presupposes the securing of lithium.  Ironically, lithium must be either mined (always under environmental pressure) or evaporated from brine rich solutions (which takes time).  Where does this endlessly demanded supply come from?  So, we had better get after these renewable energy sources and new ones, because there will be a time in the very near future, that when you go to turn on the light, you will be in the dark.