The Cure for Oil Price Anxiety: Marketing and market fundamentals

You do business in Alberta. Dropping oil prices have you worried. But a look at market and marketing fundamentals shows there’s reason for optimism and even opportunity in 2015.

Let’s look back to a recent example. Through the 2009 recession, Canada’s dollar, at its lowest, traded below 80 cents on the U.S. dollar, falling from a high of almost $1.10. West Texas Intermediate fell just as steeply, to the point you could buy almost five barrels for the former price of one.

This fall, the West Texas Intermediate price has crashed through $60 per barrel; the loonie has crashed through 80 cents. Energy stocks have, in response, traded lower and hurt the TSX’s performance.

Sounds like the last time, but with an added risk. Canada’s ratio of average house price to income per capita—a measure of Canada’s housing bubble—shows that we’re worse off than America was before its crash. If the layoffs start in earnest, a correction in housing prices and a reduction in construction could well follow.

But this storm is settling over a very different landscape. America’s recovering economy, rather than driving the recession, is in position to take advantage of reduced fuel costs and continue to grow. A growing economy, as we know it today, needs more fossil fuels to power forward.

“But, shale oil!” some will shout. America is indeed on the precipice of net energy independence. But America has also imported steadily more Canadian petroleum relative to OPEC oil, to the point that Canada has surpassed the OPEC nations as America’s primary oil and gas source. We’re positioned to ride continued American growth.

Let’s not forget that a lower Canadian dollar could stimulate growth and recovery in long-suffering Ontario, which is heavily reliant on manufacturing. A lower dollar makes our exports cheaper for foreign buyers. It also gives foreign investors better value for their foreign dollar, and foreign investment in Canada has already flirted with all-time highs through 2014.

So times may get tough, but there are lots of reasons to believe that there will be money for business to invest. Canadian companies are already sitting on more cash relative to our GDP than at any point in Canada’s history. Now’s the time to boost productivity and invest in some recession-proofing of your business. Equipment, training, and marketing can all reduce incremental costs, and that’s key to surviving a recession.

Now is a great time to examine your business’s position in the market.

Experts thrive while pretenders don’t survive. Focusing on and developing deeper expertise in the verticals you serve well can help you boost productivity enough to survive some lost business, or even take business from failing competitors.

Conversely, take a look at the verticals where there is little difference between you and your competitors. This may be a time to either find a difference or be prepared to sacrifice that business first in a downturn in order to focus in your areas of strength.

Times like these also remind us to look for less cycle-sensitive work that can sustain cash flows through slumps.

And as always, make sure you’re reconnecting and nurturing relationships while making your customer’s experience painless and productive.

This post was originally published on Dec. 23, 2014 on Incite Marketing's blog

Stats source: https://www.macleans.ca/economy/economicanalysis/the-charts-every-canadian-should-watch-in-2015/