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.
sales or fair tax.
Chinese manufacturers excel at low quality manufacturing. Such as the $22 after market replacement carburetor for your lawn mower. The problem is that 10% of those carburetors will not work right.
This is also why they can build a bath faucet for Moen that Home Depot can sell for $99. It is fine to install if you are flipping a house. However, if you want one to last for 30 years, buy a $159 Grohe faucet made in Germany.
I can support replacing income tax with consumption tax if applied in an equal fashion, rather than the government picking winners and losers of suppliers of products, which would never happen.
Imports and exports have both become a far more integral part of our economy. I am far more concerned with the government selecting which industry are punished and which are rewarded.
We need to get away from options that provide more governmental control.
One thing that people seem to miss is the fact that the products we use have changed considerably over the last 30 years or so. Cars built today contain thousands of tiny intricate electronic parts they didn’t have 30 years ago. Attempting to produce even 1 model of 100% American made car would consume a huge portion of the workforce that are needed in other industries.
I used to work for a company making interior door skins for Cadillacs. We molded the shape of the door skin, applied the vinyl, painted the skin and door handles and uppers that came from another of our factories a few miles away. Then finally electronics were placed in the door using foreign made electronics combined with plastic control panels also made at another of our factories in Michigan. The doors were then shipped to Livonia where they were combine with major parts made locally, in Canada and Mexico, and thousands of tiny parts and pieces made all over the world.
Trying to force any company to produce a complex product like a car with entirely American labor would be a disaster leading to scarcity elsewhere. Under Stalin the Ukraine produced vast amounts of food that was sold for other things leading to famine in the bread basket of the Soviet union. Had the people been allowed to diversify and buy foreign products like tractors they would have increased their productivity, been able to sell surplus and had plenty for themselves.
Wow yo prefer income taxes. You’re a progressive for sure. Good day. Comrade.
So you have a tariff to pay for government and to build domestic production and reduce imports...
What do you think happens if that actually works and imports are greatly reduced?
The goal of the bureaucracy is to maintain a strangle hold on human endeavor. This is their 401k and planned benefit retirement program - to maintain control of their paychecks through tyranny even if it means throttling human existence down to nothing. Eliminate public pensions and you solve the problem in the long term. Our government is anti-human, anti-christian and an anathema to human existence.
Thanks thackney.
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