BCG: US Manufacturing and LNG Exports Are Not a Zero Sum Game

Another report on natural gas released last week by the Boston Consulting Group titled “Behind the American Export Surge: The U.S. as One of the Developed World’s Lowest-Cost Manufacturers”, finds that the U.S. is becoming one of the developed world’s lowest-cost manufacturers as a result of low cost labor and energy. This is welcome news since more domestic manufacturing will go a long way in shrinking the trade deficit as exports have grown more than seven times faster than GDP since 2005. By the end of the decade, BCG predicts the U.S. could capture $70 -$115 billion in annual exports from other nations.

Cheap and abundant natural gas has the potential to boost our economy in other ways as well. Some question if America can sustain this manufacturing recovery while also exporting U.S. natural gas, fearing liquefied natural gas (LNG) exports will drive up domestic natural gas prices. This concern is unwarranted. The BCG study projects U.S. shale-gas production will double to 12 trillion cubic feet by 2035 – more than enough for domestic industry and for exports. Furthermore, economic studies released by the Department of Energy and a host of other groups have found that even in the highest export scenario (up to 16bcf/day), there will not be a significant impact on US natural gas prices. In fact, studies find that increased LNG exports will support more production in towns across the country delivering greater benefits – local jobs, tax revenues, and growing supportive industries. The domestic manufacturing renaissance and LNG exports are not a zero sum game but instead both are significant economic opportunities that must be harnessed in the years to come.

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Source: Act on LNG, August 26, 2013