Energy Sector to Supplant Detroit?

by | Mar 4, 2014

shaleRecent trends suggest that the US’s booming energy production market could replace automobile manufacturing as an economic powerhouse, reports CNBC.

The fortunes of the two sectors have been historically intertwined, but in recent years a massive increase in the production of shale gas – and the cheap energy it provides – is being felt across the economy, according to the news service.

A Boston Consulting Group study released in February claimed that shale gas will have a greater impact on US manufacturing than is generally assumed as cheap gas makes manufacturing more competitive – and becomes a major source of jobs in its own right.

Prices for natural gas have fallen so fast that the effect they are having on the market is akin to a tax cut. According to BCG, wholesale prices for natural gas have fallen by around 50 percent since 2005. By 2015 , natural gas will account for just 2 percent of manufacturing costs, the web site reports.

Oil and gas employment has soared 40 percent since 2007, making it one of the few highlights in an otherwise sluggish job market over that time. The shale gas revolution may add as much as 1 million manufacturing workers by 2025 due to the benefits of cheap energy and for the products used to extract the gas, according to a PriceWaterhouseCoopers report, the news service reports.

According to a recent piece by Vikram Mahidhar and David Schatsky of Deloitte:

  • US oil production recently hit a 20-year high and could surpass Saudi Arabia’s output by 2019.
  • The United States, with a 100-year supply of natural gas, will be the world’s largest natural gas producer by 2015.
  • Natural gas prices in the United States are one-half to one-fourth the gas prices in most international markets.
  • Seeing a lucrative export opportunity, developers have submitted more than 15 liquefied natural gas export projects to the Department of Energy for approval, each of which would cost billions of dollars to build. Only a few years ago, the United States was preparing to become a major importer of natural gas.

Picture credit: Shale gas drilling via Shutterstock.

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