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Shale oil find fuels boom in U.S. business
“The boom in nonconventional gas and the resulting big drop in prices have lowered feedstock costs for the petrochemicals and other industries, as well as electricity costs for steel, aluminum and glass” as U.S. electric utilities increasingly switch to inexpensive gas to run their plants and pass the savings on to customers, he said.
IHS estimates that the shale oil and gas boom already has created 1.7 million jobs and attracted nearly $100 billion in manufacturing investments.
Foreign firms flock to Texas
More than $20 billion of new investment was announced just in the past year in the Corpus Christi area, thanks to Eagle Ford, which has become the largest oil and gas development project worldwide, according to a report from the University of Texas at San Antonio.
In addition to the Cheniere gas-liquification plant, manufacturing firms from three foreign countries announced plans to build facilities in Corpus Christi. M&G Group, an Italian plastic packaging manufacturer, will spend $900 million building a factory to make soft drink bottles and other products for the U.S. market.
Austrian steel company Voestalpine AG will spend $700 million to build a plant fueled by Eagle Ford gas to make specialized steel briquettes that it will sell both in the U.S. and abroad. And the Chinese pipe company Tianjin Pipe Corp. is spending $1 billion on a plant to build seamless pipe for transporting oil and gas, generating 2,000 construction jobs and 800 permanent jobs.
According to a study by the Aspen Institute, much lower energy prices in places like Corpus Christi are a particular draw for European firms. Natural gas prices in Europe and Japan are about triple the U.S. average, while wholesale electricity prices in Germany are about double those in the U.S.
With such price advantages, U.S. industries like plastics, rubber and chemicals have the opportunity to grow at double-digit rates in coming years, it found.
The Aspen Institute’s Thomas J. Duesterberg, a specialist on manufacturing trends, noted that the U.S. advantages don’t just stem from cheap oil and gas. U.S. wage costs have remained tame compared to the country’s top international competitors in recent years, while productivity and innovation have soared and the dollar has declined all adding to the growing competitive edge for U.S. industries.
Foreign firms such as BMW, Michelin and Toyota are now using their manufacturing plants located in the U.S. as bases for exporting abroad rather than just serving the U.S. market, he noted. “This speaks to the attraction of the United States as a production platform.”
The sudden arrival of diverse foreign companies has kept the Corpus Christi port busy, enlarging facilities to accommodate these new industries as well as the eventual flow of 1.1 million barrels a day of crude oil through five private terminals.
The University of Texas study estimates that all the projects combined will create 360,000 jobs and increase the region’s economic output by more than $150 billion between 2011 and 2022.
Obstacles from Washington
But while the shale development is giving a big boost to the local economy, not all of the changes have been easy or smooth. Businesses are struggling with arcane elements of federal law and regulation, while policy gridlock in Washington not only prevents the export of some of the Eagle Ford gas without going through a highly politicized approval process, but even prevents shipment of the crude oil to other U.S. cities unless the oil is carried in U.S.-made vessels.
Since most of the port activity until the Eagle Ford find involved importing oil, gas and other products, not enough U.S.-made ships were available to send the crude to refineries on the East Coast, as required by the federal Jones Act, even though those refineries badly needed the crude, Mr. LaRue said.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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