Commercial Natural Gas Prices Drop to 12-Year Low in February, Saving Companies Billions of Dollars
In a December 2011 report “Shale Gas: A Renaissance in U.S. Manufacturing,” PriceWaterhouseCoppers (PwC) predicted that cheap natural gas will spark an energy-related manufacturing renaissance that has the potential to create one million new American manufacturing jobs by 2025. Further, PwC estimates that lower natural gas costs will generate cost savings of $11 billion annually for U.S. manufacturers, which will make them more competitive globally, and will contribute to greater profitability, increased investment in domestic production, and increased employment opportunities.
The drop in commercial natural gas prices to below $8 in February (and industrial prices, see update below), and to levels less than 50% of the spikes in 2005 and 2008 above $16, provides evidence that American manufacturers are saving billions of dollars collectively in energy costs as inflation-adjusted prices fall to 12-year lows. Thanks to having access to the world's cheapest natural gas, the U.S. has now emerged as one of the world’s lowest-cost manufacturing locations for producing chemicals, nitrogen fertilizers, ethylene, steel and iron. Welcome to the U.S. manufacturing renaissance, which has the potential to boost manufacturing employment by one million jobs by the middle of the next decade, according to PwC.
Update: The chart below shows the monthly inflation-adjusted industrial price of natural gas, which was close to an 11-year low in February of $4.25 per thousand cubic feet. Industrial users are currently paying a price that is about 42% below the $7.31 average between 2001-2012, and about 70% below the peak price in 2008 of almost $14 per mcf.