Update on Reshoring the American Chemical Industry

Almost a year ago, I pointed out that one of the benefits of improved production of shale gas for America is “reshoring” of the American chemical industry.1 The impact is particularly strong in the energy-intensive industries along America’s Gulf Coast. How large is the impact? A report from the research department of UBS is abstracted below.2

Has the “shale gas boom” had an impact on the U.S. economy?

According to UBS, “Over the year ended in Q2 (2013), the annualized current dollar U.S. net petroleum trade deficit fell from $298 billion a year earlier to $232 billion—a $66 billion decline equivalent to 0.4% of current dollar (nominal) GDP.” UBS estimates that around three-fifths of that decline (improvement) represented purchasing power “that stayed at home” instead of “traveling abroad” (i.e., much of the money stayed in the U.S.A.).

UBS adds that this estimate does not include significant contributions to GDP attributable to energy exploration and manufacturing.

How large is the impact on chemistry?

The American Chemistry Council (ACC) reports that, as of early August, there have been announcements of 124 separate domestic chemical projects (new plants or expansions) totaling $83.3 billion.3 This corresponds to 0.5% growth in America’s GDP. Recently, total GDP growth has been almost 2% per year. Since plants take at least a year to come on line, the growth will be spread out over several quarters, if not years.

Where is the growth in chemistry occurring?

By segment, the ACC reports that of 97 classifiable chemical projects, 58% were in bulk petrochemicals, 23% were in plastic resins, 15% were in fertilizers, and 4% were in inorganic chemicals. In addition, the Council recorded energy-intensive projects outside of chemistry, including 137 projects in manufactured plastic products, 20 in iron and steel, and five in tires. About 75% of these are located in America’s Gulf Coast.

These projects are significant indicators of economic growth in America. The huge shift in the cost of energy brought on by new production technology for shale gas is changing the economic models for many industries. Over a longer term, it should stimulate R&D and product development.

What are the risks of the shale gas boom?

Shale gas has risks, however. America’s windfall can be squandered if we do not consider the environment.4 The gas should be converted to electricity at the well head, with combustion products sequestered by reinjection into the source formation.5 This will provide a “closed loop” energy production cycle that reduces the environmental footprint.

References

  1. www.americanlaboratory.com/913-Technical-Articles/126761-Chemicals-are-Back/.
  2. Shale showing: Has energy boom helped much?” UBS Investment Research. US Economic Perspectives, Aug 16, 2013; www.ubs.com/economics.
  3. www.americanchemistry.com/Media/PressReleasesTranscripts/ACC-news-releases/ACC-President-Cal-Dooley-Joins-Indiana-Business-and-Policy-Leaders-to-Tout-Role-of-Shale-Gas-in-Spur.html.
  4. www.americanlaboratory.com/Blog/128110-Mitigating-Problems-With-Hydraulic-Fracking-in-the-Marcellus-Shale/ .
  5. www.americanlaboratory.com/Blog/129081-Location-Location-Location/.

Robert L. Stevenson, Ph.D., is a Consultant and Editor of Separation Science for American Laboratory/Labcompare; e-mail: rlsteven@yahoo.com.

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