Energy Boom Fuels American Manufacturing

Nov 20, 2012

The LyondellBasell Industries Bayport Polymers Plant in Pasadena, Texas uses natural gas to make plastics. Photographer: Aaron Sprecher/Bloomberg.

Natural gas is more than just fuel for ovens baking delicious Twinkies. It and oil produced from shale could be the catalyst for American manufacturing.

In the Wall Street Journal, Carlyle Group co-founder and co-CEO William E. Conway, Jr. writes that energy is one reason why he’s bullish on the United States:

Meanwhile, the discovery and production of new sources of crude oil and shale gas is lowering energy prices, jolting the U.S. into a new energy revolution. This development will lower costs and drive growth in U.S. manufacturing.

A new study on global manufacturing from the McKinsey Global Institute [via Wonkblog] also expects this new energy production to help:

This shift in energy cost has the potential to rewrite the economics of industries such as basic metals, paper and pulp, mineral products, chemicals, and rubber and plastics. In these industries energy costs can be 10 to 30 percent of value added. These industries account for 22 percent of jobs and 28 percent of value added in the US manufacturing sector.

To understand how natural gas is used to produce other products, listen to this NPR conversation with George Blitz, Dow Chemical’s vice president of energy and climate change.

Boosting manufacturing is more than wishful thinking. Economist Mark Perry points out that we’re already seeing new jobs because of this energy abundance:

In several early signs of a turnaround for energy-intensive industries, chemical manufacturing employment increased in 2011 for the first time since 1997 and primary metal manufacturing (iron and steel) employment increased in two consecutive years (2010 and 2011) for the first time since the mid-1990s.

Since shale energy is creating new jobs in the manufacturing and energy sectors it shouldn’t be a shock that the energy boom is popular at the local and state levels according to USA Today. The last thing needed is a redundant set of rules from federal regulators that would halt the continued development of shale energy.

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