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NY Times: "Rumors of a Cheap-Energy Jobs Boom Remain Just That"

1 min. read

There's been a great deal of talk in recent years about how the boom in natural gas production in the United States, combined with the low price of U.S .natural gas, could lead to a manufacturing - and possibly broader economic - renaissance in our country.  Except for one problem: according to this New York Times article, it's probably not going to happen. Why not?

...glass industry veterans say cheaper natural gas, which is used to melt sand into glass and is critical to the manufacturing process, isn’t a game changer in terms of jobs, however beneficial the cost savings are. Pressure from inexpensive imports remains intense, and labor in Mexico and China is still cheaper than in the United States.

[...]

Glass isn’t the only manufacturing sector that has struggled to add jobs recently. Other industries identified by American Chemistry Council as potential winners from the energy boom, like paper producers and foundries, have continued to lose jobs in recent months.

It’s not that manufacturing itself is disappearing. But nearly all of the American manufacturers that survived the lean years of the last decade are globally competitive companies that depend on high productivity and advanced technology for their success more than masses of assembly line workers.

It's also worth noting that it takes a lot less energy to produce a dollar of economic output in the U.S. today than it used to. According to the U.S. Energy Information Administration, in 2012 it took 7,000 Btu of energy to produce 1 "real" (e.g., inflation adjusted) dollar of GDP. This is down from 10,000 Btu per dollar of GDP in 1995, and around 14,000 Btu per dollar of GDP in the late 1970s. This means that the impact of cheaper energy on the U.S. economy is much less than it used to be. Generally speaking, that's a good thing, as it means we've gotten a lot more energy efficient. However, in terms of lower energy prices giving the U.S. economy a big boost, it's a lot less likely to happen today than 10, 20, 30 years ago.