Due to Oil Spill, An Uptick in Demand for Quality - Not Just Low Price
While the long-term impacts of the BP oil spill in the Gulf of Mexico and subsequent drilling moratorium are still in question, distributors and manufacturers reported positive and negative short-term impacts on business.
Clean-up efforts spurred a jump in hose sales for some NAHAD businesses, while others lost as much as half their business related to offshore drilling. Tom Paff, president of Campbell Fittings in Pennsylvania, reported a slight bump in orders related to oil spill clean-up efforts. Down in Houston, NAHAD member Dan Ahuero, president of GHX Industrial, LLC, said offshore drilling business was down 50 percent compared with last year, but sales in the oil and gas segment overall have increased 20 percent.
Beyond the oil spill's impact on sales, members see the promise of possible future benefits. Paff said after such disasters there is a tendency for a "knee-jerk reaction," as was the case after the oil spill in the form of the deepwater drilling moratorium. Yet over time businesses may react to the spill by searching for more reliable products to sell to oil companies.
"Overall, there's a keen high now on safety across the board," said Sam Petillo, North American Marketing Manager Goodyear Engineered Products-Veyance Technologies. "Whenever there's a highly publicized accident or spill, it always makes the drilling governing bodies in that industry question the safety and viability of safety products used."
NAHAD's Hose Safety Institute provides such references to assist distributors, manufacturers and end-users with performance standards to select the right hose assemblies.
Reported safety issues that may have led to the oil spill have resulted in a heightened awareness of quality products, including those made by NAHAD manufacturers, said Curtis Sprague, president of Branham Corp., Mersco division in Tennessee.
"It appeared that there were a lot of safeguards that were not followed," Sprague said about the oil spill.
Already, some NAHAD business owners are seeing a high demand for products, although partly the result of a recovery from the recession. Ahuero said his company is putting its focus on building inventory to meet this demand.
"Worldwide there is a shortage of hoses and raw material to make those hoses," Ahuero said. "Manufacturers and distributors reduced inventories because of the recession and then 2010 came back stronger than anyone predicted. Plants are still trying to catch up with demand."
However, some of this demand may not be reaching its full potential as many of the oil companies moved their drilling rigs and equipment to areas outside of the United States' Gulf Coast, Ahuero said.Â
"The unknown is will they bring their rigs back into the Gulf of Mexico," he said. "They're now able to buy products and services from other parts of the world."
Despite some competition, Petillo said he believes NAHAD members will see benefits from the oil spill's resulting demand for safe and reliable products.
"We don't like to say that we will benefit from accidents, but there is a deeper focus on the safety of hose products," Petillo said. "It helps quality manufacturers sell products when there's a real drive to purchase them besides just buying on price."
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