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Shale Gas to Sustain Positive Impacts in U.S. Manufacturing to 2040, Says PwC

As natural gas development in U.S. shale fields continues to mature, its positive effects on domestic manufacturing are expected to escalate over the next 25 years, PwC US said Thursday.

The consulting firm said it is seeing increased expectations from 2011 on how shale gas development has impacted cost savings and long-term employment. In the updated forecast, PwC now expects the domestic manufacturing sector to see:

  • Annual cost savings of $22.3 billion in 2030 and $34.1 billion in 2040; and
  • 930,000 shale gas-driven manufacturing jobs created by 2030 and 1.41 million by 2040.

"There's no doubt that the shale gas boom in the U.S. helped trigger a resurgence in manufacturing," said PwC's Robert McCutcheon, U.S. industrial products leader. "Reducing costs, creating jobs, and supporting investments and innovations are among the many impacts this game-changing resource has brought to the U.S. manufacturing space."

The sustained "shale effect" is tied to a high gas recovery and low price scenario, according to "Shale Gas: Still a Boon to U.S. Manufacturing?" The new estimates update those by PwC three years ago, which indicated that by 2025, the domestic manufacturing sector would see annual cost savings of $11.6 billion and about one million jobs.

"Assuming shale continues to serve as a catalyst for the manufacturing sector, we revised our cost savings and longer-term employment estimates significantly upward and could see those numbers go even higher as more businesses and global interests look to exploit shale opportunities," McCutcheon said.

Industries continuing to benefit are energy-intensive sectors that include metals, chemicals and petrochemicals, which use gas as feedstock. Increased prospects also are on the horizon as gas infrastructure is built out to support more demand, PwC said.

Researchers also discovered a continuing increase in the number of companies that are commenting about how shale gas positively impacts their businesses.

In 2013, 40 U.S. manufacturing companies included shale gas impacts in their public filings, up from 29 in 2011.

"More companies are publicly disclosing a link between natural gas production as a material advantage for their business and a source for growth in demand for their products," McCutcheon said.

A simple regression plotting the monthly U.S. Henry Hub natural gas price (x-variable) vs. monthly seasonally adjusted U.S manufacturing employment (y-variable) since 2004 yields an R-square statistic of 50.0%.

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