A new study from IHS underlines the extent by which the shale oil and gas boom is cutting the U.S. trade deficit and boosting America’s position in the global manufacturing hierarchy.
According to the study, the shale explosion is transforming America’s trade position by reducing the need for imported energy while concurrently enhancing the competitiveness—and thus the export viability—of U.S. manufacturing companies that operate in energy-intensive sectors.
The study projects that the shale boom will result in a reduction in the U.S. trade deficit of more than $164 billion by 2020. That figure represents a third of the nation’s current trade deficit.
“The unconventional oil and gas revolution is not only an energy story; it's also a very big economic story that flows throughout the U.S. economy in a way that is only now becoming apparent,” IHS Vice Chairman Daniel Yergin said. “In addition to significant job and economic impacts from the energy production and its extensive supply chains, the growth of long-term, low-cost energy supplies is benefiting households and helping to revitalize U.S. manufacturing, creating a competitive advantage for U.S. industry and for the United States itself.”
A Wider Focus
The study, titled “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy – Volume 3: A Manufacturing Renaissance,” expands on earlier research released by IHS last October that focused strictly on the upstream economic impact of the shale boom.
In that previous study, IHS reported that the unconventional oil and gas sector supports 1.7 million upstream jobs and will grow to 3 million by the end of the decade. (IHS uses the term “unconventional” to refer to shale and "tight gas"--i.e., oil and natural gas produced by horizontal drilling and hydraulic fracturing, or fracking.)
In this latest report, IHS focuses more widely on the full unconventional energy chain and the overall macroeconomic contributions to the manufacturing sector and the broader U.S. economy. Based on this wider focus, IHS reports that midstream and downstream unconventional energy and energy-related chemicals activity currently supports 377,000 jobs throughout the U.S. economy.
Combined with upstream activity, the entire value chain currently supports more than 2.1 million jobs, and that total is projected to rise to 3.3 million jobs in 2020 and 3.9 million jobs by 2025, according to the IHS report.
Chemical, Petroleum Sectors Profit
The U.S. manufacturing sectors that are reaping the greatest benefits from secure supplies of low-cost energy include energy-related chemicals and other energy-intensive sectors such as petroleum refining, aluminum, glass, cement, and the food industry, according to the study.
The chemical manufacturing sector accounted for $198 billion in exports in 2012, or 13% of total U.S. merchandise exports; the comparative export figure for 2007 was $152 billion. The IHS study forecasts that this growth in the U.S. chemical sector will continue as energy-intensive industries benefit from lower energy prices and lower electricity prices, as well as increased demand for their products as growth in investment spurs domestic consumption.
American Chemistry Council President Cal Dooley lauded the IHS report, noting that the increase in the supply of natural gas driven by the shale boom “is leading to unprecedented investment and capacity expansion in the U.S., in stark contrast with other areas.”
He noted that while North American basic chemical and plastics production is projected to double by 2020, Western Europe’s production is expected to fall by a third.
Dooley highlighted IHS’s finding that by 2025 unconventional energy is projected to spur $100 billion in investment in U.S. chemical and plastics plants and boost industry capacity by 89 million tons.
IHS’s study “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy – Volume 3: A Manufacturing Renaissance” can be downloaded here.