Our View: Supplying oil and gas sector not for faint of heart

Rubber and polymer-related companies that service the oil and gas industry always are living on the edge.

A good portion of their fate is tied to the price of oil, which can take them on a never-ending roller coaster ride. When the price of oil goes up, rig activity generally does as well, bringing them more business.

When oil goes down, so too does their business.

The constant cycles of up and down have held true through the years, keeping to a schedule that is shockingly consistent. Those supplying the sector know the drill, pun intended. They know that both the waves of good times and the depths of despair can be extreme.

That is no truer than what has transpired since the start of the coronavirus pandemic. Almost simultaneous with the wave of COVID-19 shutdowns two years ago, Saudi Arabia and Russia flooded the market with oil. The combination caused crude prices to plummet to as low as $10 a barrel, a situation where it cost more to produce the oil than the price buyers had to pay.

Because of this, work in the oilfields came to a near standstill, as did business for the suppliers.

Since that time, crude oil prices steadily improved, raising the active rig count, and business for rubber component suppliers shot back up, especially since mid-2021.

But while business has been brisk—and even better for many—there have been market factors in play that have prevented some suppliers from reaping the benefits. For some, it was the difficulty in rebuilding its work force. For others, it has been soaring raw material costs and the shortages of many key elastomers. So even as they work to bring in new business and supply other customers they haven't heard from in two years, that can prove to be a tough proposition at best.

And as they know from past experience, these good times can be just one bad event away from disappearing.

Daniel Hertz III, president of Seals Eastern Inc., fears that will be an overheated economy that leads to a recession headed into 2023. But he, like most in the market, follows one mantra: Serve the customer at all costs.

Today's market conditions remind him eerily of what happened leading to the COVID-19 downturn in 2020. Hertz could see what was coming, but still had customer needs to meet. So Seals Eastern kept its business operating full tilt to meet those needs until demand disappeared all at once.

He likened it to Wile E. Coyote of Road Runner fame, where the animal runs off the edge of the cliff, keeps running until he realizes he's up in the air and, at that moment, plummets to the ground.

And just like the coyote, those in the business hit the ground. They may be hurt. But they dust themselves off. Survive to live another day.

And they work their hardest so that they may enjoy that next wave of good fortune.