What’s behind the U.S. manufacturing renaissance? - Energy Factor
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What’s behind the U.S. manufacturing renaissance?

Suzanne McCarron - 10/20/2016

The United States is experiencing a manufacturing boom led by the petrochemical industry, as I recently noted. More than $160 billion of chemicals investment has been announced, much of it along the Gulf Coast, including a major ExxonMobil expansion at our Baytown, TX, facility. These projects are translating into jobs, increased tax revenues, and more vibrant communities.

So what’s responsible for this wave of economic activity?

That was the topic at a Houston-area luncheon last week sponsored by the National Association of Manufacturers. At the event, ExxonMobil Chemical Company President Neil Chapman shared a chart which explains perfectly why so much investment is heading to the Gulf Coast.

Chapman chart

Chemical manufacturers use natural gas as the feedstock to produce ethylene for making plastic. The key point from Neil’s chart comes from comparing the relative position of the United States in 2015 (shown as the red dot, second from left) with a decade ago (red shadowed dot on the extreme right). The U.S. now joins the Middle East as the lowest-cost regions for producing petrochemicals.

That’s quite a change from how things stood in 2005. 

Despite ExxonMobil’s long history in the region, Neil told the crowd “we would never have considered building a world-class chemical facility on the Gulf Coast 10 years ago.” Yet now we are, as are many of our competitors.

It’s a stunning reversal of fortune from just a few years ago, when the U.S. chemical industry was losing market share and jobs to competitors abroad.

Thanks go to increased natural gas supplies from the shale revolution, which didn’t get underway in earnest until the latter part of the last decade, as this U.S. Energy Information Administration chart shows:

EIA chart

Meanwhile a White House report on manufacturing reinforces many of these points:

U.S.-based manufacturers currently enjoy a competitive advantage from affordable natural gas. Once poised to be a major natural gas importer, the United States is now the number one natural gas producer in the world. The surge in American natural gas production has lowered energy costs for manufacturers and driven job growth, with U.S. natural gas costs one-half that of Europe and one-third that of Asia.

The manufacturing renaissance is one the best American economic success stories in the last decade.

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