Cheap Natural Gas Pumping New Life Into U.S. Factories
The millions of Americans who lost factory jobs over the past decade may find this hard to believe, but U.S. manufacturing is coming back to life.
The chest compressions are applied by the pumping of cheap, domestic natural gas.
"We are entering a new era," says economist Jerry Jasinowski, a former president of the National Association of Manufacturers, a trade group. He and other optimists are cheered by the increase in industrial production, which has grown at a 5 percent annualized rate since the Great Recession ended. That's more than twice as fast as the economy as a whole.
Some economists are skeptical about just how big, or long-lasting, the impact of cheap gas will be. They say U.S. factories have been perking up primarily because of the usual pent-up demand that follows a deep recession, as well as the global competitive advantage provided by a weaker dollar.
Economic historians eventually will look back and decide which assessment proved true, but for now, the "manufacturing renaissance" theory has broad support, both from business leaders and most economists. They say manufacturing's future is getting brighter because of "fracking" — an increasingly popular drilling technique used to recover natural gas from shale formations. Fracking is helping guarantee factory owners access to cheap, reliable and abundant energy sources.
People landing fracking-related jobs have gotten lots of media attention in recent years. But many more workers are quietly finding paychecks in factories as manufacturers start to take advantage of lower natural gas prices.
Consider: the price for United Kingdom natural gas futures has been hovering around $10 per million British thermal units (a measure of natural gas) while the U.S. equivalent is priced below $4.
That difference "is a game changer," said Craig Alexander, chief economist from TD Bank Financial Group. "There's no question we are seeing a renaissance in manufacturing because ... the cost advantage has shifted to the United States."
In the chemical-manufacturing sector alone, companies are building plants worth an estimated $95 billion, according to IHSGlobal Insight, a forecasting firm.
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