New energy drives manufacturing: Drilling Performance

In economics, energy is king. Access to it drives all economic development, and if you can get it cheaper than your competitors, you have a major advantage.

In 2009 (the last year for which data was available), the U.S. oil and gas industry alone—not including coal, nuclear and renewables—supported 9.2 million full-time and part-time jobs and its total economic “value-added” was $1.1 trillion, or 7.7 percent of U.S. gross domestic product, according to PricewaterhouseCoopers.

Major developments are remaking the energy market and, with it, manufacturing. For the metalworking industry, new markets have opened up, including supplying parts for the booming U.S. fracking industry, which is extracting new sources of oil and natural gas. However, other markets, like building and maintaining coal-fired power plants, have fallen on hard times.

The economic benefits of new sources of domestic oil and natural gas are staggering—close to $1 billion a day, according to Bank of America Merrill Lynch. The biggest benefit is lower utility costs because of cheap natural gas, which saved U.S. companies and consumers about $566 million a day in 2012.

That’s good news for U.S. manufacturers. Some U.S. companies that used to be at a price disadvantage when manufacturing parts and products compared to foreign firms may now be more competitive. The energy cost savings for businesses, factories and consumers will last for decades, according to some analysts. And construction of new plants, such as ethane “crackers” to refine natural gas, means investment is flowing into areas around the U.S., fueling the growth of construction companies, engineering firms, materials and equipment suppliers, and financiers.

Add to this the growth of renewables, primarily wind and some solar, and the U.S. energy market is headed for major change.