Two Philadelphia-area refineries last year nearly went out of business as they didn’t have access to the premium crude from Texas and North Dakota and were losing money importing more expensive crude from Nigeria. Their financial prospects revived when investors rescued the refineries and found a way to ship light crude from North Dakota by rail through an arduous inland route.
To accommodate the oil coming from Eagle Ford, a Philadelphia shipyard is building new tanker vessels. But the Corpus Christi port is having to make do in the meantime by expanding its barge docks and using barges to ship the oil mostly to refineries on the Gulf Coast, which already are glutted with oil.
The oil potentially could be shipped as far as Pittsburgh by barge, Mr. LaRue said, but that would require extensive dredging of the Mississippi River and Intercoastal Waterway to accommodate deep-draft barges. The federal government has been unwilling to authorize or pay for such dredging, even though barge operators have offered to pay higher taxes to fund it, he said.
“The Intercoastal Waterway, like a lot of infrastructure in the U.S. today, needs a lot of work,” but Congress and the administration have not been able to agree on how to pay for it, he said.
“It doesn’t make any sense. It’s inefficient and we’re losing productivity” having to use small barges to ship the oil, he said. But even with the much higher transportation costs that result, it’s still cheaper for refineries to use the Eagle Ford oil than to import crude at much higher prices, he said.
President Obama has been pushing for more investment in infrastructure to support the revival in manufacturing and generate more construction jobs, but that’s gone nowhere in a gridlocked Congress. Rather than approve new funding for roads, ports and bridges, most infrastructure programs took a hit under the $85 billion in across-the-board budget cuts that took effect on March 1.
Both parties say they want to promote the manufacturing revival, with Republicans favoring tax reform and tax breaks. Manufacturers embrace all such proposed reforms. But Mr. Behravesh said the boom is occurring largely as a result of private initiative and the compelling marketplace advantages of having cheap energy, rather than government design.
“This is primarily a story of market forces and entrepreneurship, not government incentives or intervention,” he said, although he and other analysts say the government should work to ensure the trend continues. The biggest job for the government, said Mr. Behravesh, will be “nurturing the energy boom while protecting the environment” a task which requires a delicate balancing of the nation’s priorities.
Challenge to China
Economists say the revival of the U.S. competitive edge in vital industries like steel and plastics has put nations like China, which had been siphoning manufacturing plants and jobs from the U.S., on the defensive for the first time in decades. Some foreign companies, like the ones locating in Corpus Christi, are deciding that rather than try to beat the U.S. competition, it’s better to join them. An added bonus is easy access to the vast U.S. consumer market, which has been the final destination of the much of the goods manufactured around the world in any case.
“We believe the U.S. is poised to lead the next manufacturing renaissance,” said Helmuth Ludwig, chief executive of the German company Siemens’ North American division, which has spent $25 billion in recent years establishing plants in Atlanta and elsewhere to manufacture drives for use in transportation, mining and other industries.
“Increased competitiveness and the ‘shale revolution’ point to the possibility of a manufacturing renaissance in the U.S. economy” that will jeopardize China’s success at attracting the world’s industries to its shores, said Manoj Pradhan, economist with Morgan Stanley.
“Should the U.S. return to sustainable growth [in manufacturing], it will likely return as a competitor for emerging markets, and not as a consumer,” draining business away from China, he said.
But Alan Tonelson, research fellow at the U.S. Business and Industrial Council, whose members compete with Chinese manufacturers, said “claims of a U.S. manufacturing renaissance are overblown.”
Despite falling energy costs, rising Chinese wages and the appeal to foreign manufacturers of locating close to customers, the revival has barely shown up in trade data, he said.