The fight to stay above water: Energy slump touches every facet of economy
The energy sector slowdown’s tentacles have reached far and wide, grabbing each part of the Bayou Region’s economy and bringing it down.
As the price of oil has plummeted from $93 per barrel in September 2014 to about $45 per barrel as of press time this week, local companies in the oil and gas industry have seen activity in the Gulf, and thus revenues, drop off dramatically. The rest of the local economy has not been spared the pain either.
Matt Rookard, chief executive officer of the Terrebonne Economic Development Authority, described the oil and gas industry as the key driver of Terrebonne Parish’s economy. He estimated the industry makes up about a third of the overall economy when factoring for its indirect impacts. With the foundering energy sector meaning less money to go around, retail, banking and other sectors have faced new challenges in staying afloat.
“Anytime that you take a hit with the way we’ve taken a hit over the past year, it really causes problems up and down the economy. Everything from retail to healthcare, it changes not only the spending patterns of the companies involved and them trying to stay afloat and make ends meet through the downtime, but it also changes the spending habits of the people.”
Rookard compared the effect on spending habits to the consumer confidence index, a national metric that measures how much Americans are spending and saving money. According to Rookard, even the perception of a slowdown could harm local consumer confidence, much less the current bust cycle the energy sector faces.
The slowdown’s effects on retail have been felt, particularly in downtown Houma. The downtown area has seen some rapid turnover in businesses this past summer. Gone is Samurai Dragon, a popular Japanese restaurant on Main Street, after 13 years in business. Bar Roussell, an upscale bar owned by State Sen. Norby Chabert, also closed its doors a few months ago.
New, smaller ventures have sprung from the ashes of those closures like diminutive downtown phoenixes. Tequila Sunset, a Mexican restaurant operated by Samurai Dragon owner Steve Lane, recently opened up around the corner from Lane’s old restaurant. Downtown Jeaux’s, Tommy Guarisco’s take on a community coffee shop, is slinging cappuccinos and sandwiches on Church Street. Women’s fashion boutique Apricot Lane moved from its location at Southland Mall to a storefront on Belanger Street.
Despite these companies bringing fresh vitality to the area, the local economy has still been sluggish. Local spending has seen a sharp decline over the past year, according to Terrebonne Parish administration. Terrebonne tax revenues through July 2016 were down 12 percent compared to revenue through July last year.
A lack of spending due to less overall prosperity and waning consumer confidence has also harmed the local real estate business, according to Rookard.
“While we haven’t seen a dramatic decrease of homes in the market, what you are seeing is more inventory and longer turns on that inventory. So that causes problems with agents, with personal liquidity issues and those sorts of things,” Rookard said.
For those local companies and workers directly servicing oil extraction, the blade gutting the bottom line has been even sharper. According to South Central Industral Association Executive Director Jane Arnette, many companies have cut back on their labor through multiple avenues. Businesses have forced employees to retire early, laid off employees and some have implemented furloughs, where employees may be paid for only three weeks out of four. Arnette said many industrial companies have reduced workforce through attrition, where those who leave, whether via retirement, layoff or quitting, are not replaced.
“Attrition is you decrease your employment. Maybe a secretary will also become a telephone operator as well. Jobs may be combined. That’s attrition. That’s people are going to have to work with less (people),” Arnette said.
For those workers, some with decades of experience in the industry but with bleak opportunity in the industry’s current bear market, there are a few different paths to go. Some choose to take a lesser job, according to Arnette, while others try to find another line of work. Still others who had to retire before they were ready may tap into their 401(k) accounts early. However, these responses to a vicious energy sector downturn have their own effects on the local financial sector, according to Arnette.
“Investment brokers are seeing a reduction in people having to use their 401ks as opposed to investing them,” Arnette said.
To address the malaise in the short term, Rookard said his staff has been working on finding marketing grants for local companies affected by the downturn to help them remarket themselves. However, options for immediate relief are scarce, as the plummeting oil price is the result of global market dynamics well beyond TEDA’s control.
While Rookard acknowledges this current slump cannot be solved by anyone in the Bayou Region, he sees economic diversification as the parish’s long-term solution. He pointed to healthcare, saying Terrebonne’s GDP has tripled in that market since 2001.
Rookard proposed the parish become even more of a regional destination healthcare center. He also proposed deeper involvement with industries that have large skill overlap with oil and gas, such as coastal restoration. Rookard said he does not want Terrebonne to get away from oil and gas and in fact wants the industry to grow as much as possible, but he does want the parish to supplement its economy by enhancing investment in other sectors that may be less lucrative during peak times, but provide more stability.
“Essentially since the mid-70s, we’ve seen pretty regular boom and bust cycles,” Rookard said. “We know we’re going to have another boom, and I think what TEDA’s focusing on right now is how do we diversify coming out of this boom and use the resources to not prevent another downturn but to insulate us from another downturn.” •