U.S. Energy Boom Has Yet to Produce a Jobs Boom
Credit: Fletcher6
Credit: Fletcher6

Although the significant increase in domestic natural gas production has considerably lowered energy prices in the U.S. and boosted the manufacturing sector, the long-expected jobs boom that could result from energy abundance has yet to materialize.


The still controversial practice of hydraulic fracking when drilling for natural gas has achieved one thing everybody can agree on: it’s brought the price of natural gas in the U.S. down to such low levels that domestic prices are 20 to 30 percent of what Europeans pay.

Cheap energy provides major benefits to manufacturing, and the prospect of an abundant supply of inexpensive domestic natural gas that could last for the foreseeable future seems poised to initiate a “manufacturing renaissance,” boosting economic growth and creating a considerable number of new jobs.

A December 2011 report from PricewaterhouseCoopers and the National Association of Manufacturers predicted fracking could help add one million manufacturing jobs in the U.S. by 2025. A similar study from the American Chemistry Council estimates that the increased natural gas production due to fracking could net as many as 662,000 manufacturing jobs across a wide swath of industries.

“Shale gas has become a game changer for the U.S. manufacturing renaissance,” Sath Rao, vice president of industrial automation and process control at Frost & Sullivan, told IMT. “Abundant quantities and subdued prices are helping U.S. manufacturing fortunes.”

In the last eight years, the upswing has been dramatic. Fracking has boosted U.S. natural gas production by about 30 percent since 2005. Last year, natural gas production hit an all-time high of 25.3 trillion cubic feet.

But despite soaring energy production, the boom in manufacturing jobs has yet to arrive. While advancements in automation and robotics have boosted American manufacturing capacity, manufacturing employment hasn’t seen a commensurate gain.

Richard A. Beuke, vice president for flat glass at PPG Industries, a Pittsburgh-based glassmaker, told the New York Times that although his company’s production has increased 10 percent in the past couple years and energy costs are down, hiring a lot of people isn’t in the cards: “Because it is automated, we won’t have to add a lot of employees with the upturn. You don’t touch a piece of glass in our factories.”

Manufacturing employment is growing, but the gains are more gradual and industry-specific than initially expected. For example, German chemicals manufacturer BASF recently announced plans for wide-ranging expansions in production and hiring in the U.S., where natural gas prices have fallen to a quarter of those in Europe, largely because of American innovations in unlocking shale gas. Since 2009, BASF has invested more than $5.7 billion into new investments in North America, including a formic acid plant under construction in Louisiana.

In the chemical manufacturing sector alone, companies are building new plants in the U.S. worth approximately $95 billion, and are likely to ramp up hiring to staff these facilities.

However, there is one factor that could have a negative effect on manufacturing jobs derived from the natural gas boom: requests from U.S. producers for expanded natural gas export permits. The glut of natural gas is keeping prices low and hurting revenues at natural gas production companies, which are throttling back on output as a result. They would like to ship more gas overseas, where it can be sold for higher prices than at home.

Companies like Exxon Mobil and Sempra Energy “are seeking federal permits for more than 20 export projects that could handle as much as 29 billion cubic feet of natural gas a day,” the Associated Press reports. “Approval of all the projects currently under review by the Energy Department could result in the export of more than 40 percent of current U.S. production of liquefied natural gas.”

Energy analysts project that signing long-term contracts for exporting billions of cubic feet of natural gas per day would increase the price of energy at home. While that would boost revenue for major natural gas producers, it would likely hinder job growth and hiring across the broader industrial sector, making the long-anticipated manufacturing jobs boom even less likely to occur.

 

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