Shale Gas Gives U.S. Manufacturers a ‘Huge Cost Advantage’ Over Foreign Rivals

This weekend, the Financial Times reported on the turnaround within the U.S. chemical manufacturing industry, made possible by the shale gas boom. This phenomenon is something we’ve covered multiple times here at Energy In Depth, from boosting American chemical exports, to companies reinvesting in the United States to take advantage of cheap gas, and even creating booms within the plastic and fertilizer industries, just to name a few.

According to the Financial Times, U.S. chemical processing and manufacturing executives are worrying less about the availability of natural gas – a key feedstock for their operations – and more about how best to take advantage of the abundance:

            “U.S. chemicals companies’ fortunes have been transformed by the shale gas boom, which is  providing them with a flood of cheap energy and raw materials for their products. The question  executives are now grappling with is how best to take advantage of this bonanza. Contrast this situation with a decade ago, when the outlook was grim for U.S. manufacturing of bulk chemicals  such as ethylene, used as a building block for a wide variety of products including plastics.  Companies were generally trying to diversify away from such activity into more lucrative specialty chemicals tailor-made for certain industries, such as agriculture and electronics.”

Several major manufacturers have been transformed by the natural gas bonanza, such as LyondellBasell and Dow Chemical. For these and other companies, low gas prices have provided a huge competitive advantage for American manufacturers over foreign competitors. In fact, foreign chemical companies are now bringing their own chemical plant investments to the United States, creating huge gains for local economies. The Financial Times article highlights the advantage of American chemical producers:

            “The weak gas prices created by the shale boom have given US-based petrochemical producers a huge cost advantage over their Asian and European rivals, such as Germany’s BASF and Taiwan’s Formosa Petrochemical.”

Manufacturing in general has been greatly aided by shale gas development, including steel and other metal producers who are providing the materials for additional energy infrastructure. But chemical manufacturing and processing have been especially fortunate, delivering more output for lower cost.

Translation: more manufacturing jobs for hardworking Americans.

America has experienced economic gains as a result of shale gas, from lower energy bills to a lower trade deficit. In the process, American chemical companies are coming out on top globally – thanks to cheap gas prices and accessible energy resources here at home.

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