By Sonia Clayton
It is understandable that people are nervous since massive layoffs are at the door. After all, the oil industry is a major producer of jobs and wealth for the U.S. It contributes around $1.2 trillion to U.S. GDP supporting over 9.3 million permanent jobs. On the other hand, the Lone Star State’s economy has been a national growth engine since the last recession ended.
Between 2009 and 2013, we have expanded at an average rate of 4.4 percent annually, twice the pace of the entire USA as a whole. So, there is no doubt that the downturn in energy prices represents a tremendous concern. Perhaps, Texas simply got lucky in recent years thanks to the hydraulic-fracturing miracle, pushing tremendous records of success for the last 50 months. So, as history demonstrates, the larger part of our good fortune comes from the oil and gas industry.
Now that the oil prices have plunged nearly 51 percent from June’s last peak of $52.69 per barrel, I believe we should be bracing for the next fall that is part of our economic cycle. I don’t believe this will be a replay of the recession in the 1980s because we now have “experience” and a highly regulated banking sector. With more vertical diversification and from lessons learned, Texas as a whole has become a well-rounded state. Presently, the oil and gas industry makes up a smaller share of the entire Texas work-force in comparison with the ‘80s recession.
As an employer and service provider of the oil and gas industry, I can see the effects first hand. Oil exploration companies have put on hold some of their most important projects for 2015. By default, oil field services corporations that provide labor and machinery will be affected and those are the corporations that generate thousands of jobs in Houston and the USA.
THE GOOD SIDE
But as oil prices drop, so will costs in many sectors, bringing the “break-even” and the stabilization of inflation. Of course, this involves a little Texas theater and here we are! First of all, oil producers will first clutch their hands and tell their suppliers that they simply cannot afford to drill any more given the downturn in oil prices. Their suppliers will offer a slight discount on their services but the producer will say, “I am not interested”. This is where we are today in the negotiating cycle. Eventually, a producer will give their former client a call saying that they are considering the proposal of getting back in the game. Desperate for work, the suppliers will eventually be willing to renegotiate a whole new agreement with lower oil prices. The aim of the new contract is to give producers close to the same margin they had when prices were much higher, so, eventually profits are restored and they get back into a reasonable cycle of production.
In the meantime, keep an eye on growing sectors such as: Information Technology, Medical, Logistics, Transportation, Travel, and Hospitality.
FOCUS YOUR BUSINESS IN THE FOLLOWING FIELDS:
- Financial Services – Particularly important due to the exiting of the baby boomer generation. Financial Services are always needed and remain strong during recessions.
- Software – Companies and individuals are dependent on the Internet and complex computer systems. These services are always needed.
- Database Administration – Most businesses have database needs.
- Education – Learning programs and training are always needed.
- Accounting – Accountants are always necessary as tax management continues to be needed even in a recession.
- Energy – With so much concern over the cost of energy, this industry will thrive regardless of the economic condition.
- Healthcare and Senior Care – According to the U.S. Bureau of Labor Statistics, nearly half of the 30 fastest growing occupations in the coming years are from the healthcare field.
- Security and Law Enforcement – This industry is more recession proof than other sectors and is needed all the time. In addition, crime rates tend to climb during poor economic times.
- Hotel and Restaurant Management – Since transportation is impacted positively; travel, food, and leisure will benefit greatly from this downturn.
- Logistics and Transportation – Lowered oil prices provide an opportunity for air carriers and the transportation industry to grow. Keep an eye on them.
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Sonia Clayton is the President and CEO of VIP (Virtual Intelligence Providers, LLC). VIP is a single source provider of Project Management, Training, Education, Leadership, Organizational Change Management, Staff Augmentation, Training, Leadership, Technical Consulting Services, and tools to empower businesses and leaders to reach their goals and potential. For more information, visit their website at www.vip-global.com.
