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America’s increasing energy abundance: Will it bring manufacturing resurgence?

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The World Energy Outlook 2012 predicts “by around 2020, the U.S. (will) become the largest global oil producer. This increasing home-grown energy abundance, in natural gas and oil, can provide an economic enticement for the return of manufacturing to the U.S., says Andrew Liveris, chairman and CEO of Dow Chemical Company.

 

After decades during which millions of U.S. manufacturing jobs migrated to China and other cheap labor countries, now there’s increasing hope that manufacturing will have a resurgence here — in large part due to the U.S. becoming a global energy power.

You read that right: The U.S. a global energy power.

The World Energy Outlook 2012 predicts “by around 2020, the U.S. (will) become the largest global oil producer. The result: a continued fall in U.S. oil imports, with America becoming a net oil exporter around 2030.”

The global energy map is changing, “with potentially far-reaching consequences for energy markets and trade,” the report said. “Energy developments in the U.S. are profound and their effect will be felt well beyond North America — and the energy sector.”

This increasing home-grown energy abundance, in natural gas and oil, can provide an economic enticement for the return of manufacturing to the U.S., says Andrew Liveris, chairman and CEO of Dow Chemical Company. He is the author of Make it in America, Practical Policy Solutions and Business Strategies for Reviving U.S. Manufacturing.

“Manufacturing in the U.S. is undergoing a renaissance,” he said in testimony before a recent Senate Energy and Natural Resources Committee hearing. This is “facilitated in substantial part by reasonable and stable prices” for natural gas, “an essential component in thousands of everyday consumer products … and in fertilizer for our farms.”

For the first time in over a decade, Liveris said, “domestic manufacturers in multiple industries, including petrochemicals, fertilizers, glass, aluminum, and steel, are planning to invest in production facilities in the U.S.”

The Boston Consulting Group has forecast that natural gas price reductions could add 5 million manufacturing jobs. Each job in manufacturing leads to at least five more jobs in the larger economy, Liveris said; each job in petrochemical manufacturing creates at least eight more jobs. Industrial manufacturing creates $8 of value for every $1 of natural gas consumed, and manufacturing firms drive innovation by conducting two-thirds of U.S. research and development.

But, Liveris said at a North Carolina manufacturing conference, this renaissance is “fragile and its outcome still uncertain.” Major question marks, he said, are the ongoing political gridlock in Washington, China’s role in the future, the debt crisis in European nations, and other issues.

“When companies like Dow go to China, they get the red carpet,” he said. “When companies like Dow go to Washington, they get red tape.”

Liveris, who is co-chair of President Obama’s Advanced Manufacturing Partnership, said the country needs “thoughtful policy” to win in the global manufacturing competition, including a national energy policy, a national effort to provide an educated worker pool, and a revamping of the U.S. business climate in which “complex and expensive regulations are stifling America.”

America’s increasing energy advantage and “a thoughtful, prudent approach to policymaking,” he said, can insure that we can leverage this competitive advantage to the benefit of all Americans.”

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