Most are skilled so can they find alternative employment in the region?
A critical factor is the disparity between wages and salaries in the oil industry and those in the rest of the economy.
I did a study recently for one of the major oil companies and assumed £70,000 as the average annual income. They asked me to change that to £110,000, which I found very hard to believe but was assured it was more realistic.
I also recently attended a presentation by someone from Wood Group.
One of his slides showed that they paid more in the North Sea than in any other region in the world where they are working and that their UK salaries were 40% higher than Norway, which I found almost unbelievable.
The official statistics indicate that average annual incomes in the Aberdeen & Grampian region are currently about £28,000. That is about 15% above the Scottish average but still very low in comparison with the £110,000 in the oil industry mentioned above.
How can other businesses such as the retail sector, NHS, fishing industry and the local authorities compete with such high wages in the oil industry?
The obvious answer is with great difficulty.
We have what economists call a dual economy in the North-east.
A key difference is between male and female employment. There are very few women working in the oil industry, particularly offshore, so there has been little impact on female employment and wages in the NHS, retail industry and the service sector generally.
I believe that has been one of the most important factors, possibly the most important.
Regarding male employment, I was in Fraserburgh recently and was very surprised to see that most of the crews on the boats in the harbour were Filipinos. One of the skippers told me that virtually all the local young men chose to work offshore, which is not surprising given the huge difference in wages.
Can they now use their oil and gas skills onshore?
The answer depends to a large extent on how willing those involved are to accept much lower wages and salaries. I suspect there will be a lot of resistance in the short run but that must decline if there are few long alternatives, which will probably be the case.
The outcome could be a significant improvement in the productivity and profitability of non-oil industries in the Aberdeen & Grampian region, if oil workers are willing to take up other jobs, which I am sure they will, albeit possibly with a time-lag after redundancy payments.
THERE can be little doubt that many people working in the oil and gas industry will lose their jobs over the next few months because of the collapse in world oil prices.