Increased natural gas production could lift domestic manufacturing

on Friday, December 14, 2012

Increased natural gas production could lift domestic manufacturingNatural gas and oil production in the U.S. is anticipated to pick up over the next several years, even with more legislators, activist groups and companies investing in sustainable procedures and technologies. The U.S. Department of Energy recently released a new report revealing the country's crude oil production is expected to rise by 760,000 barrels per day, and in 2013 the country is anticipated to produce more than 7 million barrels each day.

This increase in oil production will help the country become more energy independent and rely less on imports from other countries. Higher output could also lower prices and raw material costs for companies that rely on oil. These developments could have a major impact on the manufacturing industry.

The natural gas revolution
After years of limited growth and offshore manufacturing, the natural gas boom in the U.S. could have a dramatic effect on the manufacturing industry. With plentiful and relatively inexpensive raw materials produced at home, some companies that rely on oil in their manufacturing processes or products may move factories back to the U.S. rather than relying on imported - and potentially more expensive - oil in other countries.

According to a Forbes article, if the low energy costs bring manufacturing facilities back to the U.S., petrochemical plants could become even more competitive in the global market and, in addition to bringing some plants back from overseas, some companies could construct entirely new facilities to benefit from the low natural gas prices.

Low costs mean supply chain benefits
The movement to bring production back to the U.S. to benefit from additional oil production could also benefit companies looking to shorten their manufacturing supply chains. Even though the manufacturing labor costs in other countries may be lower than those domestically, lower shipping costs and fewer logistical steps could seem worthwhile for some organizations.

The lower cost of energy in the U.S. could also contribute to savings in logistical expenses for many firms. Those organizations that rely on shipping methods such as trucks and planes may find themselves paying less to transport their products across the country to customers.

With lower manufacturing costs, logistical expenses and shorter transportation problems, companies may find they are able to cut prices, further increasing customer satisfaction and loyalty, while still ensuring the success of their bottom line.

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