Shale Boom to Cut Deficit, Enhance Manufacturing, and Add to Household Incomes
A report from IHS indicates that Frei’s thinking was on the right track. According to the study, the shale oil and gas boom is already cutting the U.S. trade deficit by reducing the need for imported energy, while also enhancing America’s global manufacturing competitiveness, especially for U.S. manufacturing companies that operate in energy-intensive sectors. In fact, 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 — thereby eliminating one 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.” (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.)
This new study — “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy – Volume 3: A Manufacturing Renaissance” — expands on research released by IHS last October. According to these reports, the unconventional oil and gas sector 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. Further, more than 460,000 combined manufacturing jobs (3.7 percent of all manufacturing jobs) will be supported in 2020, rising to nearly 515,000 (4.2 percent of total manufacturing jobs) in 2025. 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 percent of total U.S. merchandise exports — up from $152 billion in 2007. The IHS study forecasts that this growth in the U.S. chemical sector will continue as energy-intensive industries benefit from lower energy prices as well as increased demand for their products.
“The shale boom “is leading to unprecedented investment and capacity expansion in the U.S., in stark contrast with other areas, ” said American Chemistry Council President Cal Dooley in referenced to the IHS report. He further noted that North American basic chemical and plastics production is projected to double by 2020, while 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.
Additionally, U.S. households are benefiting from lower electricity and heating bills because of the boom created by shale oil and gas, adding more than $1,200 last year to the discretionary income of the average U.S. family. That number will reach $2,000 by 2015, according to the IHS study.
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