Geology Reference
In-Depth Information
manufacturers of household products, and builders, or are exported at prices com-
petitive with state-owned firms in the Middle East, the world's lowest-cost oil and
gas producers.
In industries where petrochemicals are a large part of the cost base, companies
could shorten the supply chain and return manufacturing work stateside. Should
this come to pass, the accounting firm PricewaterhouseCoopers estimates, lower
feedstock and energy costs could add one million new American factory jobs by
2025.
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The American Chemistry Council says that a 25 percent increase in the supply
of ethane, a liquid derived from natural gas, could add over 400,000 jobs, provide
over $4.4 billion in annual tax revenue, and add $16.2 billion in capital investment
by the chemical industry alone.
Louisiana provides a case study in how the fluctuating price of natural gas has
shifted the fortunes of major corporations. Because the state is resource-rich, and
natural gas once cost just $2 per thousand cubic feet, Louisiana enticed numer-
ous chemical companies to build plants across the state. But in the fall of 2005
Hurricane Katrina devastated the Gulf Coast, and the price of natural gas jumped
sevenfold, to $14 per thousand cubic feet. This sent a jolt through the industry.
Yet even before the storm, Louisiana's gas supplies were dropping and prices were
rising, which caused several big employers either to mothball plants or to move
them.
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Consider the case of Dow Chemical. Gas represents half of its operating costs,
and the skyrocketing prices after Katrina forced the temporary shuttering of one
of its largest petrochemical plants. “The US is in a natural gas crisis,” Dow CEO
Andrew Liveris testified before the Senate at the time. “The hurricanes have dra-
matically underscored the problem, but they did not cause it.… We simply cannot
compete with the rest of the world at these prices.” Switching its focus abroad,
Dow invested in China and the Middle East—including a $20 billion joint ven-
ture to develop oil and gas facilities in Saudi Arabia—where energy prices were
much lower. “Our industry will continue to grow,” Liveris maintained. “It's simply
a question of where we will grow.”
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