U.S. manufacturing industry could benefit from the ripple effect of shale gas

October 11, 2012

U.S. manufacturers could be the latest beneficiaries of the boom in shale-gas that many believe is a game changer for domestic business strategy, a recently released report shows.

According to The Columbus Dispatch, the report by PricewaterhouseCoopers indicates that the continued extraction of natural shale-gas is not just good for the economy, but for manufacturing companies that can take advantage of cheaper fuel costs. Although the report relates to the chemical industry, the authors estimate that shale gas could add more than one million workers to U.S manufacturing by 2025, with companies being able to lower the annual costs of raw materials and energy by up to a combined total of $11.6 billion.

With U.S. manufacturing strategy focused on leveling the playing field that has been dominated by overseas competitors in recent years, cheaper fuel and lower labor costs could see outsourced production returning to the country. Business analysts see the development of the domestic market as running parallel with the availability of shale gas, with some regions already benefiting from the increase in jobs and economic growth that the boom has brought.

"The report reiterates the growing consensus that shale gas is spurring a renaissance in American manufacturing," said Cal Dooley, president and CEO of the American Chemistry Council. "The PwC report finds that for chemical manufacturers, and a wide range of other sectors of the American economy, natural gas has the potential to boost manufacturing competitiveness and spur new waves of economic investment."

The authors of the report believe that the manufacturing industry will benefit from a ripple effect initiated by low cost of natural gas, especially if manufacturers replace petroleum-based raw materials with ethylene-based materials that can be derived from the gas. Figures show that the chemical industry in Texas has already benefited from $15 billion in new investments, reducing the cost of materials that can be used in producing machinery, clothing and electronics.

"The positive impacts could flow through the value chain into other manufacturing sectors, particularly given that chemicals are used in an estimated 90 percent of all manufactured products," said Anthony J. Scamuffa, U.S. chemicals leader for PricewaterhouseCoopers. "It could potentially drive domestic reshoring activity and possibly bring about a favorable shift in the U.S. balance of trade as ethylene capacity comes online."