Will shale gas bring a manufacturing renaissance to the US in spite of the Obama administration’s best efforts to make energy costs “skyrocket”? Matt Clinch, of CNBC, thinks it may and that emerging nations; such as China, will be negatively affected.
With the help of cheap energy, manufacturing will pick up and move down the ladder to capturing the production of less “sophisticated” goods (computers, fabricated metals and automobiles) currently manufactured in emerging nations. As a result, the United States will likely compete with emerging markets for market share rather than being a consumer, Morgan Stanley said.
“As the manufacturing renaissance takes hold in the U.S., the move down the value-added ladder in the U.S. is likely to clash with China’s need to further increase the sophistication of its manufacturing base,” it said.
China, however, also has gas shale. They claim they has enough shale gas to provide all of China;s energy needs for 200 years. Maybe they do and maybe they don’t. We must always remember that China is a command economy and that always leads to gross inefficiencies. China is planning to spend $12.8 billion in the coming years to develop their shale gas resources. But, rather than bring in North American experts to do the drilling and development, they awarded all contracts to Chinese companies.
Given the limited extraction capability of Chinese firms, this will exacerbate the already immense challenges China faces in extracting the natural gas and bringing it to market.
These challenges are among the factors that have caused China to fall behind its own shale gas targets. Last year the National Energy Administration announced the goals of producing 6.5 billion cubic meters of shale gas annually by 2015 and between 60 and 100 billion cubic meters by 2020. But with China still not producing shale gas commercially the 2015 target seems increasingly out of reach. Besides this latest auction Beijing has announced subsidies to shale gas producers as a means of jump starting the industry.
It is not just that American manufacturing companies are thinking of bringing their factories back to America. The Wall Street Journal notes that:
BEAVER COUNTY, Pa.—Three decades after being devastated by the closing of steel mills, this gritty river valley is hoping its revival will come from cheap natural gas.
The hope doesn’t rest on drilling rigs, but on a multibillion-dollar chemical plant thatRoyal Dutch Shell PLC is considering building here because of a flood of domestically produced natural gas. Community leaders are touting the plant as the first step toward reviving a manufacturing industry many thought was gone for good.
In mid-2008, U.S. natural-gas prices topped $12 per million BTUs. The current price is just $3.54 per million BTUs. The U.S. government expects the average price to stay below $5 for another decade, after adjusting for inflation. German and French companies now are paying nearly three times as much for gas as U.S. companies, and Japanese companies even more than that.
So, will the American Renaissance happen? The only thing standing in the way of an incredible economic boom, as a result of the world’s lowest cost energy, is American politics. As long as the regressive Progressives stay in power, they will do everything possible to derail this potential renaissance. Since Barack Obama took office in 2009, he and his
Energy Penalty Agency Environmental Protection Agency have worked to drive up the cost of energy in America. Asylum Watch has reported that one influential leftist think tank is promoting a huge tax on each barrel of oil (Council on Foreign Relations) and another wants to tax carbon (Brookings Institution). While Obama and his circus of fools are pushing wind power and solar power, European companies are looking to escape the high green energy costs their governments have forced on them and are looking to come to America where energy costs are or could be much lower. But, Obama’s priority is climate change. So, will sanity come to this asylum we live in or will progressive politics win over common sense?
Well, that’s what I’m thinking. What are your thoughts?
Previous posts on The Politics of Oil and Gas
- The Politics of Oil and Gas __ No. 1, “New Middle East”?
- The Politics of Oil and Gas __ No. 2, “Will King Oil Be Dethroned By King Gas?”