Energy Change You Can't Believe In

April 22, 2014
Manufacturers in a recent poll say they are skeptical about an "energy premium" and, if one comes, unlikely to spend the windfall on more workers.

The boom in domestic production of oil and natural gas has analysts and politicians talking about energy independence, or at least greatly reduced dependence, for the United States in the next few years.

With all that new production, industrial manufacturers, who consume about 25% of the energy used in the U.S., should be licking their chops at the prospect of lower prices and improved competitiveness.

But when asked if they anticipate lower overall energy costs over the next 2-3 years, 54% of manufacturers surveyed by PwC in its latest Manufacturing Barometer disagreed. Moreover, 81% said they aren’t planning for lower overall energy costs in the next 12-18 months.

Manufacturers do show more optimism in a slightly longer timeframe, with 42% saying they are planning for lower energy costs in the next 2-3 years.

Manufacturers told PwC they do expect a positive impact from lower energy prices. Some 62% said it would benefit the U.S. economy and 63% said it would boost consumer confidence.

But manufacturers appear out of synch with some projections that lower energy prices will have a huge impact on the job market. Boston Consulting Group, for example, has projected that lower energy prices and rising labor costs in China could combine to produce 2.5 million to 5 million jobs by the end of the decade.

Yet in PwC’s Manufacturing Barometer, only 39% of manufacturers said lower energy costs would lead to new hiring in the U.S. and just 33% said it would contribute to their company’s revenue.

What would manufacturers do if they did find themselves with an “energy premium” in the near future? Nearly 3 out of 4 (74%) said they let the reduced costs drop to the bottom line and increase profits. Only 32% said they would add to their workforce and just 18% said they would use the extra money for increased capital spending.

Bobby Bono, PwC’s U.S. industrial manufacturing leader, said the spending findings were “in line with the conservative stance to long-term capital outlays we are seeing across the industry.” He added: “While U.S. industrial manufacturers are investing in operational improvements and product development, they also remain focused on guarding against risk, maintaining strong balance sheets and supporting profit margins.”

About the Author

Steve Minter Blog | Executive Editor

Focus: Global Economy & International Trade

Email: [email protected]

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An award-winning editor, Executive Editor Steve Minter covers global economic and international trade issues, tackling subject matter ranging from manufacturing trends, public policy and regulations in developed and emerging markets to global regulation and currency exchange rates. As well, he supervises content production of all IW editorial products including the magazine,, research and informationproducts, and executive conferences. 

Before joining the IW staff, Steve was publisher and editorial director of Penton Media’s EHS Today, where he was instrumental in the development of the Champions of Safety and America’s Safest Companies recognition programs.

Steve received his B.A. in English from Oberlin College. He is married and has two children.

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