This Just In
  • NFL approves Oakland Raiders move to Las Vegas by 2020. Financing for new 65,000-seat stadium includes $750 million in public money backed b
  • Lippman Connects and AMR International are launching an industry conference on data strategy. Transform debuts July 20 in Washington.
  • Transform complements AMR’s Data and Digital Event Strategy in London. Speakers are from inside and outside the exhibitions industry.
  • Detroit’s Cobo Center receives ASTM Venue Standard recertification, having first received certification in 2015.
  • Host to this year’s Sustainable Brands Conference, Cobo Center was the 9th facility in 2015 to receive ASTM Venue Standard certification.
  • Convention Data Services broke ground on its new corporate headquarters in mid-March. The approximate 30,000-sf building opens in Q1 2018.
  • The new digs are next to the current CDS HQ in Bourne, Mass. The construction will accommodate the company’s growth and create new jobs.
  • China’s Shenyang New World EXPO opened March 1, hosting 2 exhibitions in its first month of operation, with a third to be held 23-25 March.
  • To date, the largest event was a dental equipment and oral health exhibition, open 16-19 March, which drew more than 39,000 attendees.

Lower Gas Prices to Pep Up U.S. Economy; Terrorism Still a Wild Card

Darlene Gudea
, Publisher
February 2, 2015

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Oceanside, CA – 2015 began with shock waves, when seven days into the new year, 12 people were gunned down in a terror attack at the offices of Charlie Hebdo, a French satirical magazine that published controversial cartoons of the prophet Mohammed. Two days later, another terrorist killed five people at a kosher grocery store before French forces successfully freed 15 hostages.

The tragic massacre ignited a massive unity rally in support of freedom of the press and against radical Islamists. The Paris rally, attended by over 1.6 million people and more than 40 world leaders, sparked similar demonstrations in the U.S. and around the world. In response, anti-French protests by Muslims occurred in Niger, Pakistan, Turkey, the Middle East and parts of Asia offering a stark juxtaposition between democratic and Islamic cultures.

Extreme terrorism is a destabilizing force in the global economy as we learned in the aftermath of 9/11. Terror attacks are spreading in Western Europe, the U.S., Canada and Australia. Trade show executives must not fall asleep behind the wheel. As event organizers, we may one day have to deal with terrorism due to the very nature of the large-scale events we produce. In addition, the fear factor could restrain international participation in trade shows. All of us are “Je suis Charlie,” a phrase which has become a widespread rallying cry for the freedom of self-expression and resistance to armed threats.

International Travel May Slow

Frank Chow, chief economist for Trade Show Executive Media Group, feels the uncertainty spawned by these attacks will continue to restrain the economy in 2015 and in fact, may be reaching a new level. For example, hackers committed cyber attacks on 19,000 French websites shortly after the unity rallies — many from well-known Islamic hacker groups. “International travel will be more subdued than otherwise if terrorist attacks continue,” he predicted.

$220 Billion in Gas Savings

Sadly, the attacks have overshadowed the biggest economic event thus far in 2015: the dramatic and ongoing plunge in energy prices. “Brent crude oil has fallen over 57% since its peak last June, with a 14.8% occurring in 2015,” Chow pointed out. Gas prices in the U.S. averaged about $2 a gallon in January. “American drivers will save an  estimated $220 billion a year, almost $1,000 for every household,” he said. Some oil analysts forecast prices will drop below $40 a barrel from its current $49, providing more savings.

Drivers are not the only beneficiaries. Here is a list of others reaping the energy jackpot:

  • Homes and businesses in northern and eastern states using heating oil. The Energy Information Administration estimates the typical American household will  save $750 this year.
  • Transportation companies such as airlines, railroad, shipping, trucking and package delivery.
  • Manufacturers and other energy-intensive firms.
  • Government agencies with large fleets.
  • Auto companies and related suppliers.
  • Retailers, restaurants, entertainment venues, and leisure and business travel.
  • The trade show industry, as a result of lower costs in travel, shipping, raw materials, etc.

A $500 Billion Injection into the U.S. Economy

“If prices remain at the current levels, total benefits could amount to a $500 billion injection into the U.S. economy in 2015,” Chow said.  Unfortunately, consumers have yet to respond in a big way. Retail sales dropped (0.9)% in December from November — the biggest pullback in nearly a year, the Commerce Department said. Gasoline purchases accounted for more than half the decline. Auto sales also retreated in December although car sellers had their best year in nearly a decade. Yet retail sales, excluding gasoline and cars, were also disappointing, falling (0.3)%. However, when compared to the prior year, sales were up 3.2%, and if you exclude gasoline sales, sales rose a solid 5.3%.

The National Retail Federation reported holiday sales from late November through New Year’s Day rose 4%, excluding automobiles, gas stations and restaurants. It was the biggest gain since 2011. “This report paints a rosier picture,” said Chow, “but it appears consumers may be pocketing much of the pump savings, most likely because they perceive the lower energy prices as transitory. The longer energy prices remain low; consumers will eventually begin to loosen up their pocketbooks, especially if the labor market continues improving.”

Is There a Downside to Low Oil Prices?

Of course, low oil prices have a downside:  the energy industry is starting to scuttle oil rigs, slash capital projects and lay off workers. Oil is a revenue source in more than 24 states. States like Alaska, North Dakota, Oklahoma, and Texas have reaped tremendous benefits from the oil boom. “Now the retrenchment is beginning,” said Chow. “Housing projects and home sales in these states will slide unless prices rebound.” Chow believes the best way to offset the decline and pay OPEC back is to rescind the 1975 ban on crude oil exports. He said the Obama administration already lifted some restrictions on very light crude exports.

At the same time, lower crude prices indicate the global economy is slowing. Europe, Russia, India, Japan, Argentina, Venezuela and Brazil are fighting deflation or recession. China is struggling mightily with its construction and real estate sector so oil demand has waned greatly. Greece may exit the Eurozone should the Syriza party win as expected. There is a lot of international nervousness, with India, Denmark, Turkey, Peru and Canada announcing surprise rate cuts and Switzerland is startling decoupling its franc with the euro. The European Central Bank announced a $69 billion a month QE stimulus.

Global Impact

“The U.S. could be dragged down by the weakening global economy and oil sector retrenchment spreading to related industries,” Chow warned. “However, Goldman Sachs energy analysts believe the benefits of higher sales and margins (from energy savings) more than offset these fears.” Chow believes there will be trade-offs:  the oil price decline is a large boon to developed countries like Japan, China, and Germany helping them out of their economic malaise, while being a detriment to energy-based economies like Russia and the Middle East. “Overall, cheap energy is overwhelmingly more of a help than a hindrance to growth,” Chow said.

The University of Michigan/Reuters Consumer Sentiment Index hit an 11-year high in January, driven largely by low fuel prices and rising jobs. But some economists are worried that U.S. growth may be overstated due to weak wage growth, sputtering retail sales, and stalling factory activity like the recent Philadelphia Fed survey. “While such concerns are legitimate, I think they may be overblown,” said Chow. He believes the factory slowdown is due mostly to the faltering global economy. “If oil prices drop lower than $40 a barrel, I expect the global economy to turn around with an assist from Central Bank stimulus money. At that point, the biggest obstacle to growth would be if the Arab Spring lands on American soil again.”