NAM Study Shows Economic Benefits of Natural Gas and Pipeline Development
A recent study from IHS Economic, commissioned by the National Association of Manufacturers (NAM), puts into perspective how beneficial natural gas development and natural gas pipeline expansion can be for the U.S. economy, domestic manufacturers, and everyday Americans.
The study follows up on a similar report released in January, which highlighted the impact of crude oil pipeline development. Unlike the previous report, however, the current study reveals just how much money families saved thanks to the increase in shale gas production in 2015. As the report notes:
“The U.S. economy experienced significant gains in 2015: IHS estimates that economic benefits from increased domestic shale gas production and the accompanying lower NG [natural gas] prices include contributions of $190 billion to real gross domestic product (GDP), 1.4 million additional jobs, and $156 billion to real disposable income.” (p. 4)
According to the NAM, that $156 billion in disposable income is equivalent to an average of $1,337 put back into the pockets of American families.
Other highlights from the report include:
- Natural gas access added 1.9 million jobs across the U.S. economy in 2015, including 60,000 in manufacturing and 347,000 from new natural gas transmission lines alone.
- Total natural gas demand is expected to increase by 40 percent, thanks in large part to manufacturing and power generation.
- Domestically produced supply is also projected to increase 48 percent by 2025 in order to meet the increase in demand.
- Thanks to technological improvements in energy development, such as fracking and horizontal drilling, the report predicts energy intensive industries (chemicals, refining, metals, etc.) will outperform the U.S. economy through 2025.
According to the U.S. Energy Information Administration (EIA), the United States is currently the world’s largest producer of natural gas. Spurred on by fracking, this abundance of natural gas dropped the commodity’s price for industrial use to almost a 20-year low. This is great news for manufacturers, as the report estimates that 80 percent of industrial demand for natural gas comes from the manufacturing sector. Used for fuel in processes like melding or drying, as well as a feedstock in refining and chemical production, natural gas not only save U.S. manufacturers money, it allows them to be more competitive in the global market. As the report states:
“Going forward, lower natural gas prices will result in benefits to consumer purchasing power and confidence, higher profits among businesses, and improvements in cost-competitiveness for domestic manufacturers relative to their international competitors.” (p. 4)
But as the report shows, the increase in natural gas production and demand from manufacturers creates a need for expanded infrastructure to gather, transport, store and export the natural gas. For example, onshore production of natural gas rose 30.6 percent between 2007 and 2013 according to the EIA. To meet the increasing supply, IHS estimates that around $25.8 billion was spent to construction 6,028 miles of new natural gas transmission lines in 2015 alone – and that growth is projected to continue. According to the report:
“While the rate of capacity additions could slow over the short term, additions are needed over the medium to long term to meet IHS’s view of supply and demand fundamentals.” (p. 41)
Continued expansion of natural gas infrastructure aids employment, as every mile of pipeline equates to jobs created. These jobs are either from building the structure (direct), or created in industries that benefit from the pipeline expansion (indirect), such as manufacturing. According to the report:
“The accompanying table shows that for every mile of NG transmission line pipeline built, a total of 57.9 jobs would be created in the United States, including 9.9 manufacturing jobs per mile.” (p. 39)
Overall, natural gas is vital to the U.S. manufacturing sector and economy as a whole. As this new report shows, increasing natural gas production in the United States brought about by fracking, coupled with increasing demand from industries such as manufacturing, makes natural gas infrastructure essential. While providing thousands of jobs and contributing billions to the economy, new natural gas pipelines allow us to take advantage of the vast shale resources that fracking gives us access to, keeping U.S. manufacturers competitive internationally and putting money back into the pockets of everyday Americans.