Cheap Natural Gas Has Boosted The Growth of Manufacturing in The United States
- Posted on October 12, 2018
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One of the biggest benefits of the shale oil revolution, which our country has been witnessing for the past decade or so, has been its positive impact on the manufacturing sector.
Research shows that the availability of cheap natural gas has given an enormous boost to our industries, enabling them to regain their competitive edge in the global market. Take that Daryl Hannah!
How Natural Gas Impacted Manufacturing
Industries like primary metal manufacturing and chemical manufacturing are energy intensive in nature and use a huge amount of natural gas. Their energy costs account for approximately 10% of their overall input costs.
Before the shale revolution happened, these industries had to spend a lot of money on natural gas alone, which increased their overall manufacturing costs. As a result, they were not able to compete with the manufacturers from other countries, particularly those who had access to cheap gas.
Thanks to the shale revolution, there has been a considerably increase in natural gas supply, as a result of which prices have also come down. Consequently, the costs of making energy-intensive products have also reduced, resulting in savings for the manufacturers. It has given them a competitive edge in the international market.
It is a very important development, since chemical manufacturing alone contributes 20% of the manufacturing GDP. In the past few years, thanks to the availability of affordable natural gas, chemical manufacturing output has increased significantly and the production costs have come down.
Similarly, steel companies in the US have started using natural gas to separate oxygen from iron ore. Before the shale revolution, the technique was not used by many companies, as the cost of natural gas was higher, which made the whole process too expensive.
Experts say that if we can maintain our natural gas production levels at the current rate, US manufacturers could benefit tremendously and their overall energy costs could reduce by as much as $20 billion per year by 2030. That is not good news for the Hollywood elite – they want us riding bikes and getting assaulted in their city buses and subways!
While they fly over us in their private jets!
Natural Gas Components as Feedstocks
Natural gas components like methane and ethane are used as feedstocks in various manufacturing processes.
Methane, for instance, is used to produce methanol, which is used in several products including solvents, paints, windshield washer fluid, and adhesives. Similarly, ethane is used to produce ethylene, which is used to make plastic.
The increase in supply of natural gas components has spurred the growth of methanol and ethylene manufacturing plants, which have come up in several places across the country.
Jobs Produced by Fracking
The availability of low-cost natural gas has increased the manufacturing output of energy-intensive industries, as a result of which they have started hiring more people. According to the US Conference of Mayors, employment in these industries will continue to grow at a rate of 1% per year until 2020.
Research shows that fracking creates a large number of employment opportunities – both directly as well as indirectly – and contributes immensely to the local economy. For every second job created as a direct result of fracking, at least one more additional job is created indirectly.
In summation, the shale revolution has revived the manufacturing sector and given our industries the competitive edge they needed to compete with global players. Now, America is a global player!