Oil and gas are in the news a lot these days. This industry has seen extensive growth in the last few years and has been a driving factor in the economic recovery. Although, at the time of this writing, low oil prices are impacting shale operations in this country, the fracking revolution is still vital for American manufacturing.

Technologies such as fracking enable us to recover energy reserves that were previously inaccessible leading to increased energy supplies while driving down prices. As reported recently by Pricewaterhouse Cooper (PwC), “The surge in shale gas production and consumption in the US has proven a genuine game changer on a number of fronts including: strengthening US energy security and independence, and helping trigger a resurgence in US manufacturing.”

Why is manufacturing benefitting from a domestic energy source? To answer this question we need to briefly recap the history of U.S. manufacturing. About 50 years ago, most goods Americans bought were made in this country. Our manufacturing industry was the backbone of the economy and the employer to a large portion of the population. In the 1970’s as the oil crisis was occurring, manufacturing centers in other countries offered a better environment for making goods. Costs were less for overhead and labor and the incentives to move operations overseas were great.

Currently, those overseas markets are not as attractive as they once were. Labor and energy costs made manufacturing more costly and then the added costs of shipping goods caused many manufacturers to consider moving operations back to the U.S.

The domestic energy and resulting lower costs have given America the edge in the reshoring trend. The national sentiment is also on the side of homegrown manufacturing with many consumers choosing Made in the USA over made overseas. As more companies offer products made in this country, more manufacturing will return.

The PwC analysis finds that shale gas will provide U.S. manufacturing with an annual cost savings of $22.3 billion in 2030 and $34.1 billion in 2040. In addition to increase employment in the oil and gas industry itself, the projections for manufacturing jobs created by 2030 could be 930,000 and 1.41 million by 2040.

The energy boom is a benefit for manufacturers and should continue to be so for many years. Now that we know that the reserves are recoverable, the country can withstand the fluctuations and changes in the global industry and continue to be a positive place for manufacturing.

Resources:

http://www.pwc.com/en_US/us/industrial-products/publications/assets/shale-gas-boosts-us-manufacturing.pdf

http://www.forbes.com/sites/brucemccain/2015/02/09/the-facts-behind-oils-price-collapse/

http://www.theguardian.com/business/2015/feb/07/shale-industry-hibernation-us-economy-fears

 

 

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