Tonight in Missoula, a man in his mid 50s is getting an Eagle Scout award. The man is Larry Simkins, CEO of the Washington Companies, the giant international conglomerate based in Missoula with interests in railroads, shipping and mining.
He’s getting the Distinguished Eagle Scout Award, which isn’t handed out that often. Past recipients include President Gerald Ford and Montana author and historian Stephen Ambrose.
Simkins says he remembers when he got his original Eagle Scout award.
"Getting it awarded in Helena, Chief Justice Harrison was there to present it to me, which really doesn’t resonate until 40 years later, you reflect back, the fact that the Chief Justice was at a 15 year old boy’s ceremony, is pretty profound," Simkins says.
He says scouting was important to him because it nurtured his lifelong love of being active in the outdoors, and it gave him early leadership opportunities. They must’ve stuck, because Simkins now leads a diverse set of global businesses.
"We’re the largest lessor of container ships in the world," says Simkins. "We have 77 container ships in the water right now, we have 109, the rest of them are on order."
The Washington Companies also own the active copper mine in Butte, Montana Rail Link Railroad and a heavy equipment company that has half its sales into Russia.
On the occasion of his Distinguished Eagle Scout award, we thought it would be interesting to get Simkins’ perspective on how the dramatic drop in the price of oil worldwide is reverberating through the economy, and here in Montana.
"In the companies that we’ve got, we consume about 22 million gallons of fuel a year."
So when the price of fuel drops by something close to 50 percent, that’s got to have a dramatic impact, right?
Not so much, Simkins says, because the companies tacked on fuel surcharges when prices went up, and now they have to take those surcharges off what they charge some of their customers.
"At the end of the day, it is a slight net positive, but not the way you might think on the surface or it looks from 30 thousand feet," says Simkins. "The more important part is that our customers are doing better. A lot of our customers, the lower fuel costs means they have more discretionary income and they have the ability to do more things than they would when the prices are higher."
Simkins says that the lower transportation prices companies like Montana Rail Link are charging should translate into lower consumer prices as companies shipping goods see their costs drop, but he can’t say when.
And he says lower fuel prices are cutting costs at the Montana Resources mine in Butte, but those savings are being offset by lower prices for the copper ore pulled from the mine.
The Washington Companies also make winglets, those little upward-sweeping tips you see on the end of airplane wings lately.
Those save fuel, and, with fuel prices down, Simkins says.
"That’s provided our customers, which are the airlines the opportunity to delay the installation," says Simkins. "The business case isn't as good now at these lower prices as it was before, but its benefiting them now profitability-wise and they have more discretionary income that now they can spend on other things other than winglets as well."
So the drop in oil prices isn’t universally good for every business around the world, even those that burn a lot of petroleum. In Russia, for instance, where The Washington Companies sell lots of heavy equipment for the country’s gold mining industry.
"Our customers are so far from the refineries, that these lower prices aren’t going to get to them for months the dynamics are fascinating to watch and the contrast to what we’re experiencing here."
Low oil prices are also causing the value of Russia’s currency to crash, and to compensate, the government has instituted a new fuel tax. Simkins says that’s putting significant financial pressure on their Russian customers.
But a weaker Canadian Dollar, also due in part to lower oil prices, is helping the Washington Companies' ship building business north of the U.S. Border.
"We have three shipyards in Canada, and so our shipyard prices are a bargain now, compared to anybody else that we compete with on the west coast of the United States."
Low oil prices are also causing layoffs in the tar sands region of Alberta, and that’s good news for Simkins’ shipyards as well.
"We’ll be hiring a thousand skilled workers at our shipyard, and those skills are some of the exact same skills that they have in the oil sands, so that’ll be important for us, as well."
Tonight Simkins will be receiving the Distinguished Eagle Scout Award from Governor Steve Bullock in a ceremony at the University of Montana.
