Small Business Today Magazine FEB 2015 TAYLOR CONSTRUCTION MANAGMENT | Page 36
EDITORIALFEATURE
The Lone Star
State Crisis
By Sonia Clayton
I
t 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
34 SMALL BUSINESS TODAY MAGAZINE [ FEBRUARY 2015 ]
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 transpor