Everyone remembers what happened to automotive suppliers when the Great Recession hit the U.S. Most had to enact severe cutbacks. Others went through bankruptcy, sold out or simply went out of business.
Now a similar situation has hit those supplying the nation's oil and gas industry. Just like automotive, the bottom dropped out of oil and gas in a hurry.
For much of 2014 into 2015, the total count of operating rotary rigs exploring for oil or gas in the U.S. hovered between 1,800 and 2,000. That number had roughly doubled from 2012-14.
During this time, suppliers to the industry flourished, including those making a wide array of rubber goods designed to operate in the harshest of environments—from offshore oilfields to the flourishing fracking market. The rubber product makers in the sector ranged from well-diversified global conglomerates to small “mom and pop” shops deriving from 70-100 percent of sales from oil and gas. During boom times, companies across the spectrum were hiring, investing and preparing for future growth.
But as oil prices dropped, the operating rig count went into a freefall. By May 2015, the number was below 1,000, and went under 800 by November. And things just kept getting worse. For the week of March 11, the count was 480—386 for oil and 94 for gas—the lowest level since Baker Hughes started counting rigs in 1949.
Firms hurt worst are those with most of their fortunes tied to oil and gas. As the nation relishes paying less at the pump, these firms are laying off staff, cutting hours and trying to deal with requests from customers for massive price cuts.
Where they can, they're trying to find new markets, tackling R&D projects and gaining needed certifications—items that are neglected during boom times.
About the most optimistic thing anyone is saying is they believe the market has bottomed out. They know the market will bounce back, but nobody knows when.
But unlike automotive, it doesn't appear there is a government bailout coming anytime soon.