Red tape worse than low oil prices?
The Dallas Federal Reserve recently put out its monthly manufacturing survey, and the results weren’t good: Factory activity declined again, after several months of weakness. This time, though, it also asked manufacturers a special set of questions on how they’ re affected by low oil prices, andthe answers were interesting.
On the one hand, manufacturers said that the continued period of low oil prices is taking a bigger toll on their business this year than last. Onthe other hand, when asked to rank their concerns, 81 percent of those surveyed put “government regulations” in their top three, comparedto 38 percent who included energy prices and 23 percent who cited the strong dollar.
Really? Government regulation? In a place as anti-regulation as Texas?
O fcourse, a number of those rules are federal —the Affordable Care Act, for example, andthe Environmental Protection Agency’ s Clean Power Plan. But a lot of the policies come from Austin. The Texas Manufacturers Association has a long list, including truck weight regulations, electricity rates and business taxes.
Things are a little different in Houston, however. Here, the oil down turn really is most manufacturers’ chief concern.
Damien Garza is president of the Houston-based contract manufacturer Electronic Services Unlimited, and has 10 employees now— about half what his staff was at the top of the oil boom.
“It’s a ghost townin all the shops right now. That’s what we’re dealing with ,” says Garza, who also serves as membership director at the Greater Houston Manufacturers Association. “I haven’t seen any state regulations come across that look like they’re detrimental.”
He says that healthcare costs are a big issue for the smaller companies as well, but not having paying customers makes those troubles seem small. And oil industry dependence is not an easy problem to fix.
“I would love to say we’re a super diverse company, but I along with a lot of my colleagues deal directly with Hal li burton and Baker Hughes ,” Garza says. “When you try to diversify, you’ re along with 50 companies that are trying to diversify.”