Oil companies pay well. Everyone knows that. But not everyone is happy to just work as a roustabout for $45,000 a year. Some people have brains, and want to use them. For people like these, studying Geology in college is a good bet. So what is a geologist salary on an oil rig?

As a rough indicator, we can look at the study published by the American Geologic Institute in 2008. They reported that fresh geology graduates (with a relevant Masters) were being hired by oil companies for $80,000 to $110,000 a year. Apart from that, they received sign-on bonuses like cars and houses. Not too shabby for entry level personnel, eh?

But how about more experienced staff? According to the University of Houston (in 2007), a petroleum geologist with 10 years experience can earn an average of $130,000 a year. Again, a very respectable salary for someone who is not an upper level manager, isn’t it?

But does this data still hold true? After all, we are just starting to recover from a worldwide economic recession, and then there was the recent Deepwater Horizon disaster. The answer is, “Yes, more or less.”

Why? The reason is a combination of old history and current economic fundamentals. The old history dates back to the Roaring ’80s, when the economy was going strong and growing fast, but the price of oil had dropped to under $10 per barrel because of a glut partially caused by OPEC. At this time, there was so much oil already in storage that no one wanted to drill anymore oil wells. As a result, tens of thousands of offshore drilling jobs were lost worldwide, including the United States. Not only that, but recruitment for oil rig work practically remained frozen for the next 20 years.

When the surplus oil ran out in the late ’90s, and the demand from the gigantic developing economies of China and India rocketed up, the price of oil rose into the sky. By 2008, the price of oil had mostly exceeded $150 per barrel. The oil service contractors who had previously laid off tens of thousands of oil rig workers suddenly found themselves without enough men to operate their oil platforms. They desperately posted vacancies in offshore drilling employment, but never found enough men for oil exploration or to drill their existing oil fields.

This continued shortage of oil arguably contributed to the 2009 recession (together with the mortgage crisis). Even now, in 2010, there is a continued shortage. After all, OPEC rhetoric aside, what else can you call the situation when oil already costs more than $60 per barrel even though the world economy has only just recovered from the recession.

Basically, there is continued incentive for the oil companies to find new sources of oil. The Tupi and Jupiter deep water oil fields found off the shores of Brazil just a few years ago are clearly not enough. Exxon alone spends between $25 billion and $30 billion every year just looking for new oil fields and drilling for oil. Obviously, there will be a strong demand for geologists to find new sources of oil, and this will continue to drive the salaries higher.

Basically, a college student who can graduate with the right Masters specialization in Geology can expect to earn a salary of $80,000 to $100,000 a year, if not more. For the reasons outlined above, the demand remains strong and the supply limited (it takes 4 years to get the Bachelors degree and another two to four years to get the Masters degree). It’s all simple economics.