Posted on 06/29/2015 8:41:40 AM PDT by thackney
“Made in the U.S.A” is becoming more affordable. The reason? Fracking.
You don’t need to a Nobel Prize in economics to know that the fracking revolution has been good for the U.S. What’s not so well known is just how competitive cheap oil and gas has made American manufacturing. BCG, the Boston consultancy, estimates the average cost to manufacture goods in the U.S. is now only 5% higher than in China and is actually 10% to 20% lower than in major European economies. Even more striking: BCG projects that by 2018 it will be 2% to 3% cheaper to make stuff here than in China.
Part of the reason for the narrowing gap is that wages have been rising in China. And American companies have been boosting their productivity faster than many of their international competitors. But perhaps the single largest factor is that fracking has helped dramatically drive down the price of oil and gas that’s being used in energy intensive industries such as steel, aluminum, paper and petrochemicals. BCG calculates that U.S. industrial electricity prices are now 30% to 50% lower than those of other major exporters.
“A 5% price discrepancy in manufacturing between China and the US doesn’t amount to much,” says BCG’s David Gee, “when you consider that US manufacturers face the risks of delay when shipping from China, the threat of port strikes, and the local investments and partnerships that Beijing often requires of foreign companies doing business there.”
Lower energy prices can also open up new opportunities such as a using natural gas to power fleet vehicles and trucks, which would reduce American dependence on foreign oil and cut greenhouse gases. Natural gas can also be converted into hydrogen to power fuel cells like the ones in Toyota’s Mirai passenger car. (The Japanese car giant will start taking orders for the Mirai in California this summer.)
Over the last few years, cheap energy has encouraged players in various industries to earmark $138 billion for new U.S.-based investments. This spring, for example, the petrochemical giant Sasol started construction on an $8.1 billion ethane cracker at Lake Charles, La. And energy companies like Cheniere are building multi-billion LNG terminals on the Gulf of Mexico to export overseas, where natural gas can be three to four times more expensive than it is in the U.S.
How long will America’s advantage last? Harvard Business School’s Michael Porter, who along with BCG issued a new report in June called “America’s Unconventional Energy Opportunity,” says that America has about a 15-year lead on other nations when it comes to fracking. The most telling number to make that point? The U.S. has 101,117 fracked wells, followed by Canada’s 16,990. By contrast China has 258.
Formation yes, but certainly not continuance. I give you our own loss of manufacturing here, but even a better example is Venezuela after Chavez took over.
Plenty of energy resources, he might have crashed the country faster but Obama and our legislature is doing just as good a job to take us to the same place when the takers now finally outnumber the producers.
You mean Uncle Gen. Mao Zi Dung
But it's not. Look at the data.
I agree. Despite ZEro and his attempt to destroy America, we are still a sleeping giant that could swamp the rest of the world if released.
One of the things Rick Snyder has long supported here in Michigan is a state strategic reserve of natural gas that could be released in times of high energy costs. While he speaks of it primarily for business, it would be good for all.
Add to that the theft of intellectual property, and the certainty that any successful product will shortly have copies being made at a Chinese-owned factory down the road, staffed by your former employees which YOU trained in how to make it right.
It's not really worth while to make anything in China, if it contains significant design and engineering intellectual property.
Over the last 30 years all the social turmoil, welfare expansion, huge trade deficits , high unemployment, poor product quality, and currency devaluation could have been prevented with a tariff, a really small one at that. Maybe just 5%.
I hope that fails. Government should not compete with private industry. The Natural Gas storage industry does this already. The most economic method of providing lower cost energy is done by private industry, not government.
China’s labor force has actually started to shrink, if ever so slightly. 200 million or more abortions will do that to a population.
Its costs are rising and consumers are demanding better quality, workers want better conditions and better pay. Factories using only manual labor have terrible constant turn-over.
Want more freedom?? Give people the right to the fruits of their labor and property rights. China isn’t a model but they’ve come a loooong way since Mao. It is absolutely true the world over.
Don’t give a crap about the world. I am an American and I care about America, gloBULLism is highly over rated.
Ignoring your competition is a good way to lose to your competition.
Prior to 1950 the USA was self sufficient and strong. We need to get back to that.
Prior to 1950, China and many other 3rd world nations of the time had little manufacturing capabilities.
How would you accomplish your goal?
I want less government interference in private business. Economic drives efficiency and production.
I want our borders enforced including tariffs. There is enough of a market inside the USA to promote competition.
So you want more taxes to the government and higher prices above other countries for the american business.
I expect such actions will result in less jobs and less manufacturing in the US.
No thanks. I don’t want the government deciding who we should buy from or sell to.
I want tariffs and NRST to replace all income taxes. Would you be in favor of that?
Absolute horse hockey. Manufacturing jobs in the US average $24/hour. Manufacturing jobs in China are around $2-3/hr.
What is NRST?
Which why we provide more CNC machines and they provide more toasters.
Read the chart in post #5. There is a lot more cost of manufacturing than labor.
Right.
When people pull up to a gas pump, for example, almost everything in use - fuel, tanks, pumps, piping, valves, metering and instrumentation, electronics - is American-made. Of the small percentage that isn’t American, most is even higher-cost European stuff.
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