4
Apr

If the bookies are to be believed, Chelsea Clinton could turn out to be luckiest US president in history.

The holy grail of American leaders over the past four decades, from Richard Nixon to Barack Obama, has been energy independence, and thanks to shale oil and gas, the dream could soon become reality.

The International Energy Agency (IEA) and oil giant BP certainly think so – they believe the US will be energy independent by 2035.

As Mr Obama said in his State of the Union address last year: “After years of talking about it, we are finally poised to control our own energy future.”

No-one is suggesting America will stop importing power overnight, but being largely self-sufficient in energy could have widespread implications not just for the US, but for the rest of the world.

US economy

Last year, the United States spent about $300bn (£180bn) on importing oil. This represented almost two-thirds of the country’s entire annual trade deficit. Oil imports are, therefore, sucking hundreds of billions of dollars a year out of the US economy.

As the IEA says, a persistent trade deficit can act as a drag on economic growth, manufacturing and employment.

If the US achieved energy independence, not only would the country spend far less on cheaper, domestically generated power, but the money would be going primarily to US-owned energy producers.

The US’s oil import bill also constitutes about 2% of the country’s annual economic growth. As the US economy averages about 2% growth a year, the country would, in effect, be getting a year’s growth for free.

Paul Dales, at Capital Economics, argues that as this would be spread out over the next 10-20 years, the annual benefits would be much smaller – in this instance, 0.2%-0.1%.

True, but comparing now with energy independence, the boost to the US economy of ending oil imports would be significant.

US energy imports

US manufacturing

Energy independence will come about only through cheap and abundant shale oil and gas, which could help spark a golden age for US manufacturing.

US energy prices are far lower than those in Europe and Japan, and this fact – together with rising wages in China and the increasing productivity of US factories – means a number of US firms are looking to bring production back home – a process known as reshoring.

Several companies, including Dow Chemical, General Electric, Ford, BASF and Caterpillar, have announced hundreds of millions of dollars of investment, either in new plants or in re-opening shutdown facilities. Even Apple has announced a new factory in Arizona more than a decade after closing its last US plant.

In fact, between 2010 and the end of March 2013, almost 100 chemical industry projects valued at around $72bn were announced, according to the American Chemistry Council.

Indeed a study by accountancy firm PricewaterhouseCoopers estimates that one million manufacturing jobs could be created by 2025 thanks to low energy prices and demand from the shale gas industry. Further analysis by the Boston Consulting Group points to a surge in US exports of manufactured goods.

An Uncle Sam balloon
Many economists believe shale will spark a renaissance in US manufacturing

Any boost in production to US manufacturing would obviously lift overall economic growth even further. In fact, the benefits are already being felt – many economists point to cheaper energy as one reason why the US has outperformed in recent years. Read more…

By Richard Anderson, Business reporter, BBC News

Published on April 2nd, 2014 in http://www.bbc.com/

Comments

branded usb sticks April 8, 2014 - 9:54 am

Nice! Thanks for the awesome workout! I tried it out for a week and enjoy doing it. Cheers!

http://saveonpromotions.tumblr.com/post/77663480971/how-choosing-right-color-can-influence-your-sales

Leave a Comment

*

We use both our own and third-party cookies to enhance our services and to offer you the content that most suits your preferences by analysing your browsing habits. Your continued use of the site means that you accept these cookies. You may change your settings and obtain more information here. Accept