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Nearly Every Manufacturer in the U.S. Will Benefit From Low-Cost Natural Gas

A new analysis by The Boston Consulting Group finds that cheap domestic energy is increasing the U.S. cost advantage in a wide range of industries, improving U.S. competitiveness. The cost advantage has already started to boost investment and employment and will persist for at least five years.

The energy cost advantage is amplified by the fact that overall U.S. manufacturing competitiveness is already improving owing to relatively low labor costs compared with those of other developed economies, rapidly rising wages in China, and high productivity.

“Several major forces are aligning right now that are dramatically reversing the fortunes of a U.S. manufacturing sector that many gave up for dead just a few years ago,” said Harold L. Sirkin, a BCG senior partner and a coauthor of the study. “The energy advantage and improved competitiveness are unique to the U.S. and are accelerating an American manufacturing renaissance.”

By 2015, natural gas will account for only 2 percent of average U.S. manufacturing costs and electricity will account for just 1 percent, according to BCG estimates. By contrast, natural gas will account for between 5 and 8 percent of manufacturing costs in Japan and in Europe’s major exporting economies, where it is more expensive, while electricity will account for between 2 to 5 percent in Japan and Europe. Cheap energy will also help further narrow the cost gap between the U.S. and China, where natural gas and electricity combined will account for 6 percent of manufacturing costs.

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