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Jan112012

Shale gas: A one-million job renaissance for American manufacturing

January 10, 2012 | Posted by Ken Cohen … A recent study by PricewaterhouseCoopers, “Shale Gas: A renaissance in US manufacturing?”, sums up two main reasons why exponential growth in U.S. shale gas production is giving a much-needed boost to U.S. manufacturers - and creating the potential for 1 million more manufacturing workers by 2025.Amid all the concern expressed about a decline in the United States’ manufacturing base in recent years, a positive turn of events is helping drive a comeback in this critical sector of the American economy: shale natural gas.

The first is the increase in demand for everything from steel pipe to drill wells to new chemical manufacturing facilities that turn natural gas liquids into feedstocks for plastics, synthetic fibers and more.

The researchers found that 17 U.S. manufacturers had publicly disclosed to their investors higher demand due to shale gas development in 2011 - whereas there were no companies who made such disclosures in 2008.

“The rapid increase makes sense given that companies that sell goods such as metal tubular products and drilling and power-generation equipment are likely to experience near-term growth in sales as domestic natural gas production rates move higher,” the researchers concluded.

The second reason behind the boost to manufacturing is competitively priced energy and feedstock supplies for America’s manufacturers.

Manufacturers consume huge amounts of energy - approximately one-third of all the energy produced in the United States, as a matter of fact. Natural gas supplies in the U.S. are abundant and affordable, which could mean an annual cost savings of $11 billion for U.S. manufacturers, according to the study.

“Consequentially, this relatively abundant domestic energy source has the potential to drive an uptick in U.S. manufacturing over the long term and create new jobs in the sector,” the researchers found.

U.S. manufacturing companies could employ 1 million more workers by 2025, thanks to affordable energy to power their operations and greater demand for products to extract the gas. For a country that, according to one source, has lost nearly 8 million factory jobs since manufacturing employment highs of more than 19 million in 1979, this offers a tremendous opportunity for economic recovery.

Evidence of this job creation and economic growth is already visible in several shale gas states. The study lists multiple companies looking to build or expand ethylene production facilities near shale gas production along the Gulf Coast and in the Appalachian states, in addition to those building or expanding steel plants in Ohio.

I’ve written about these job-creating projects before, and they are just the start of the manufacturing “renaissance.” But just like any renaissance in history, its outcome will be largely influenced by the policies of the country where it takes place.

The decisions made by U.S. lawmakers and citizens about taxes and regulations pertaining to the shale gas industry will heavily influence the ability of companies to invest - not just natural gas companies looking to invest in production, but also those manufacturers looking to use the gas in their operations or invest in products that support gas production. A large and affordable supply of energy in our own backyard is a huge competitive advantage for U.S. manufacturing in the global economy.

You can read the full study at the National Association of Manufacturers’ website.