Arecent report projected that he cost of manufacturing in the U.S. will fall below costs
in China within the next three years, in
large part due to the rise of fracking.
Fortune, citing an analysis by
Boston Consulting Group, reported that the average cost to produce
goods is currently only 5 percent
higher in the U.S. than in China, and
that the cost is expected to be 2 to 3
percent lower by 2018.
Rising wages in China and
increased industrial productivity in
the U.S. contributed to that trend, but
the report cited hydraulic fracturing
as the primary reason for the shift in
Increased production from shale
formations led the U.S. to the top of
global rankings for petroleum and
natural gas production despite plummeting crude oil prices worldwide
last year. As a result, the prices U.S.
industrial customers pay for electricity now fall from 30 to 50 percent
lower than the rates in other top exporting nations.
Falling energy prices particularly helped the metals, paper
and petrochemicals sectors, which rely heavily on those fuels.
A chemical trade group expects the plastics industry alone to
create 127,500 jobs over the next decade due to increasing natural gas production.
The Fortune report noted that increased domestic production
can also curb transportations costs, particularly with trucks
fueled by natural gas.
Although falling crude costs hurt the U.S. energy sector in
recent months, analysts also expect the country’s fracking pro-
duction costs to soon become competitive with conventional
Maintaining the country’s fracking advantage over other
nations could also pay dividends in efforts to bring manufacturing jobs to the U.S. from overseas. A BCG analyst noted
that even the current 5 percent cost gap between the U.S. and
China could persuade companies to produce domestically,
thereby avoiding potential shipping delays and political complications.
News & Notes – Report:
Fracking is Helping Manufacturing
Costs Drop Below China
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