Shale gas provides major boost to US manufacturing

The surge in shale gas production is projected to save U.S. manufacturers billions of dollars annually and result in long-term employment gains for the manufacturing industry.

According to a report issued by PricewaterhouseCoopers (PwC) in December 2014, manufacturers are estimated to save $22.3 billion annually by 2030, and $34.1 billion by 2040. PwC also estimates that continued shale gas activity could create 930,000 shale-gas-driven manufacturing jobs by 2030, and 1.41 million shale-gas-driven manufacturing jobs by 2040. These projections have dramatically increased from PwC’s 2011 report, which estimated that manufacturers could save up to $11.6 billion annually by 2025, and $11.2 billion annually by 2035 in a high recovery, low price scenario.

PwC’s report is predicated upon the scenario of continued low natural gas prices and high yields. Under this scenario, manufacturing sectors that are energy-intensive, such as metals, and manufacturing sectors that use natural gas as a feedstock, such as chemicals, will likely reap the highest benefits from the shale gas production. In addition to benefitting from these shale-related benefits, PwC’s report predicts that manufacturers will also benefit from the massive amount of infrastructure (i.e. machinery, pipes, etc.) required to meet both domestic and international natural gas demands.

“There’s no doubt that the shale gas boom in the U.S. helped trigger a resurgence in manufacturing,” said Robert McCutcheon, U.S. industrial products leader, PwC. “Reducing costs, creating jobs and supporting investments and innovations are among the many impacts this game-changing resource has brought to the U.S. manufacturing space. Assuming shale continues to serve as a catalyst for the manufacturing sector, we revised our cost savings and longer term employment estimates significantly upward, and could see those numbers go even higher as more businesses and global interests look to exploit shale opportunities.”

PwC’s report also identified developments that could conceivably influence the benefits of shale gas development to U.S. manufacturers. These developments include environmental issues, supply exceeding demand, insufficient natural gas refueling infrastructure, and changes in tax policy that could affect capital investments. PwC’s report further found that more companies are publicly disclosing a link between natural gas production as a material advantage to their businesses in SEC filings (40 in 2013 compared to 15 in 2010).

You can read the PwC report in its entirety here.