Engineering Inc. - January/February 2015 - (Page 10)
BY G E R RY D O N O H U E
2015 Forecast: Oil and Gas Surge Slows; Office
Buildings, Manufacturing Markets Rebound
he nearly exponential
growth in domestic
natural gas and oil production-which has breathed
life into an otherwise drab
economic recovery over the past
few years-will slow in 2015.
The glut of natural gas and oil
in global markets pushed down
oil prices by 35 percent in the
second half of 2014 to around
$65 a barrel in early December.
While lower energy prices
will likely boost the national
economy, they will also make
methods-such as hydraulic fracturing and horizontal
"Oil and gas are embedded
in several sectors," says Lee
Smither, managing director of
FMI. "Some of it is in power,
some in manufacturing, land
development, transportation-you have to look at all of
these together to get a sense of
how big a driver energy is for
While those sectors are forecast to grow in 2015, because
of project backlogs, a long-term
dip in oil prices could slow an
engineering market already burdened by near stagnate public
Technically, the U.S. economy
has been expanding since 2009,
but recovery from the 2008
financial crisis has been historically weak.
"We have growth without
acceleration," says Kleinfelder
President and CEO William
Siegel. "I just don't see the 4,
5, 6 percent GDP growth rates
coming back any time soon."
Neither do the economists. A
cross-section of economic forecasts puts U.S. GDP growth at
between 3.0 and 3.25 percent in
2015 and between 2.5 and 3.0
percent in 2016 and 2017.
"We haven't yet hit escape
velocity to get out of the spot
we're in," Smither says, adding,
"I think we're close."
EBI Survey: Private Markets
Show Strength, Backlogs Increase
2015 will be a good year, particularly for private client markets,
according to ACEC's Engineering Business Index (EBI), which charts
the health of the engineering industry through survey responses
from hundreds of firm leaders.
In the third-quarter survey, conducted in October, firm CEOs produced a solidly positive composite score of 68.8. Any score above 50
More than six in 10 (61.7 percent) respondents expect to see
improvement in the Land Development market in 2015, 56.1 percent
in Power and Energy, and 53.1 percent in the Buildings and Commercial sector.
Firm backlogs have grown-65 percent reported higher backlogs
compared with the same time last year-and 49.3 percent expect
their backlogs to increase further in 2015.
Public market expectations are lagging. Only 43.8 percent of
respondents believe that the Water and Wastewater segment will
improve in 2015, and only 39.7 percent expect the transportation
market to grow.
To view the full EBI report, go to www.acec.org and click on the
"Engineering Business Index" link.
JANUARY / FEBRUARY 2015
Moving oil and natural gas
from recently discovered fields
to refineries and to market
represents both a challenge and
an opportunity, because many
of these sources are in areas not
served by existing pipelines.
Thousands of miles of pipeline
have been approved and those
projects will begin in the next
Recent reports suggest energy
companies are reconsidering
tens of billions in infrastructure-including pipelines-in
the wake of the oil price drop.
Railroads have been spending
nearly $16 billion per year for
the past several years to upgrade
infrastructure to ship oil and
natural gas in the absence of a
robust pipeline infrastructure.
Continued rail development
will provide substantial opportunities for engineering firms
over the next several years.
Domestic manufacturing will
capitalize on affordable oil and
gas, both as a fuel and as a raw
material. Analysts expect the
sector to continue to expand,
averaging more than 7 percent
growth from 2015 to 2018.
Construction spending in the
sector was up 23 percent in
November compared with a
year ago. In addition, manufacturing employment is at its lowest level since 2008.
The office building market, which has not fared well
in recent years, is also having
a resurgence and is forecast
to grow at better than 5 percent annually through 2018.
"Vacancy rates are the lowest
they've been in years and we're
seeing a lot of high-rises being
built-and not just in New
York City, but in Kansas City
and Minneapolis and even in
Atlanta," Smither says.
The lodging market has been
the most volatile segment over
the past six years. After shrinking by nearly 75 percent from
2007 to 2009, the segment
grew by almost 70 percent from
2012 to 2014. Projections have
the lodging segment growing at
8 percent annually over the next
Highway and street construction is forecast to average about
2.5 percent annual growth
through 2018, and the water
and wastewater markets will
grow by only 3 percent annually. In both cases, the problem
is limited funding.
"For highways it's all about
federal funding, which hasn't
been forthcoming in recent
years, and I don't have a lot of
optimism looking forward,"
In the water and wastewater
markets, the low levels of funding are primarily at the local
level. "Local tax bases have still
not recovered to pre-recession
levels," he says.
The education market,
expected to average only 3 percent growth in coming years,
is struggling to adjust to the
expansion of online learning.
The healthcare segment will
continue to show moderate
growth of 4 percent in 2015
and only 5 percent in 2016.
Gerry Donohue is ACEC's senior
communications writer. He can
be reached at email@example.com.
Table of Contents for the Digital Edition of Engineering Inc. - January/February 2015
Engineering Inc. - January/February 2015
From Acec to You
The Business Case for Diversity
Closing the Gender Gap
Market Stability Keeping Pli Prices Low
2015 Legislative Scorecard
Made to Market
2014 Fall Conference Highlights
2015 Annual Convention Preview
Members in the News
Mergers and Acquisitions
Engineering Inc. - January/February 2015