Thanks to Shale, U.S. a “Rising Star” in Global Manufacturing Again

A new Boston Consulting Group (BCG) report released today underscores the clear economic benefits associated with responsible shale development – which is soaring across the Appalachian Basin – especially as it relates to America’s manufacturing sector’s ability to compete and win in the global marketplace.

These game-changing shale benefits – which has “helped buffer Pittsburgh against the worst effects of the recession” and is “giving American manufacturers a unique competitive advantage” – were highlighted by Vice President Joe Biden while he, and President Obama, were in Western Pennsylvania recently:

“You all know about the Marcellus Shale  — I think you heard of that, right? (Applause.) There’s an energy boom that’s changed the paradigm of manufacturing. It’s cheaper to manufacture in the United States than it is in Europe and/or in Asia.”

Vice President Biden is absolutely right, and here’s what several news outlets are reporting today:

  •  “New report calls U.S. a ‘rising star’ of global manufacturing”: Call it the comeback kid. … A new ranking of the competitiveness of the world’s top 25 exporting countries says the United States is once again a “rising star” of global manufacturing. … The biggest factor driving the U.S. rebound, according to BCG: cheap natural gas prices, which have tumbled 50 percent over the last decade as a result of the shale gas revolution. (Reuters, 4/25/14)
  • “Study: US manufacturers gaining competitiveness”: U.S. manufacturers have grown more competitive over the past decade compared with factories in China, Brazil and most of the world’s other major economies. So says a new private study, which found that rising wages and higher energy costs have diminished China’s long-standing edge over the United States. So has a boom in U.S. shale gas production. It’s reduced U.S. natural gas prices and slowed the cost of electricity. (Associated Press, 4/25/14)

Here are key excerpts from BCG’s report (which builds upon similar firm research; the U.S. Conference of Mayors has studied shale’s positive impact on U.S. manufacturing as well):

  • Rising Stars. The overall manufacturing-cost structures of Mexico and the U.S. have significantly improved relative to nearly all other leading exporters across the globe. The key reasons were stable wage growth, sustained productivity gains, steady exchange rates, and a big energy-cost advantage that is largely driven by the 50 percent fall in natural-gas prices since large-scale production of U.S. shale gas began in 2005. … Overall costs in the U.S., meanwhile, are 10 to 25 percent lower than those of the world’s ten leading goods-exporting nations other than China.
  • “While labor and energy costs aren’t the only factors that influence corporate decisions on where to locate manufacturing, these striking changes represent a significant shift in the economics of global manufacturing,” said Michael Zinser, a BCG partner who is coleader of the firm’s Manufacturing practice. “These changes should drive companies to rethink their sourcing strategies, as well as where to build future capacity. Many will opt to manufacture in competitive countries closer to where goods are consumed.”

It’s clear why Pennsylvanians overwhelmingly support safe, job-creating shale development. Join us, and so many others, to march for jobs and energy on May 6 in Harrisburg and become a United Shale Advocate today!