Shale Development Makes American Manufacturing More Competitive

Shale development has been a boon to American manufacturing, providing low cost energy and affordable feedstock for companies across the country. As a result, the American economy is making a much needed economic comeback, while new jobs that were once thought lost for good are returning to our shores. In fact, a recent report by PricewaterhouseCoopers (PwC) found the development of natural gas from shale could add more than one million U.S. manufacturing jobs by 2025. That’s something to talk about, as many did this week.

According to a recent analysis from Reuters, low-cost natural gas made a $2.08 trillion contribution to the U.S. manufacturing sector in 2013 alone. Indeed, the increased supply of domestic, affordable natural gas is enhancing America’s manufacturing competiveness, forcing companies to invest in the United States economy instead of abroad.

As Reuters noted:

“In the United States, electricity prices are falling thanks to natural gas derived from fracking – the hydraulic fracturing of rock. Louisiana now boasts industrial electricity prices of just $0.055 per kWh, according to U.S. Energy Information Administration data. Peter Huntsman, chief executive of the family firm {Huntsman Corp.}, calls the United States the new global standard for low-cost manufacturing. Huntsman is spending hundreds of millions of dollars to expand in the United States, and rapidly closing plants in Europe.”

As the article explains, natural gas is both a power source as well as a key feedstock for an array of manufactured products, from the tires on your car to the shampoo in your bathroom. Henry Fukuchi, director of ratings and analytics at S&P, discussed what this means for American companies in Platts this week:

“‘A lot of the petrochemical and chemical companies are very energy-intensive so you have a very favorable perspective from the feedstock standpoint and from a fuel-cost perspective in terms of the capital intensity of these businesses,’ he said. ‘So all in all, I think that this is going to continue to be a positive, at least for the next few years, for the North American producers versus the other companies that have assets in Western Europe that have costs that are relatively higher.”

Thanks to shale development, companies are increasingly looking to invest here in the United States, spurring job creation and simultaneously reducing the trade deficit. As Reuters reports:

“Wacker, which had sales of 4.5 billion euros last year, is one of the German firms making the shift stateside. The company is investing up to $2.4 billion in a new polysilicon plant in the U.S. state of Tennessee. With 650 employees and capacity of at least 20,000 tonnes a year, the plant will boost Wacker’s capacity to make the material by nearly 40 percent. …”

“Cheap, plentiful natural gas has helped boost manufacturing’s contribution to U.S. Gross Domestic Product by 15 percent since 2008, when fracking started to become popular. Natural gas made a $2.08 trillion contribution to the U.S. manufacturing sector last year alone.” (emphasis added)

As Mark Muro of the Brookings Institution stated this week, “the U.S. manufacturing revival is if anything more real and more profound than has been acknowledged.”  From new fertilizer plants in Iowa and the Dakotas, to new and expanded steel facilities in the Rust Belt, shale development is boosting American competiveness – and much more investment is still to come.

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