Could Fracking Spur a Manufacturing Renaissance? - Modern Distribution Management

Log In

Could Fracking Spur a Manufacturing Renaissance?

Despite a recent slowdown in shale gas extraction, production is expected to continue driving investments in manufacturing.
Angela
Author
Date

Hydraulic fracturing, or fracking, a technique for extracting gas from shale developed in the 1990s, has led to greatly increased natural gas production over the last 10 years. Fracking utilizes a horizontal drilling technique, along with the flushing of water, sand and chemicals into drilled tunnels, to release gas from previously unreachable shale plays.

\"TheDownload a Free Chapter:
The Little Black Book of Strategic Planning for Distributors

Submit your email address below to receive a chapter of Brent Grover’s new book. When you submit your email you will be signed up to receive weekly distribution news updates.

\"\"

Fracking has created new opportunities for companies active in or touching the oil and gas industry in the U.S., a country with the second-largest shale reserves in the world according to the U.S. Energy Information Administration.

According to the EIA and the U.S. Geological Survey, only 3 percent of potential shale gas reserves in the U.S. have been tapped. By 2040, shale gas production in the U.S. is expected to quadruple, accounting for 50 percent of U.S. natural gas production by 2030, according to a report from the James A. Baker III Institute for Public Policy.

Many distributors, like GHX Industrial, have benefited from a surge in U.S. and Canadian oil and gas shale production over the past five years. (Learn more about how GHX and other distributors have capitalized on this growing industry in the MDM article The Ongoing Shale Gas Opportunity.)

Despite a recent slowdown in production due to a drop in prices, shale gas extraction will likely continue to drive growth in manufacturing. For example, some industries are using natural gas in lieu of oil-based chemicals to make propane, butane and other ingredients in manufactured products. As a result, companies are investing billions of dollars to upgrade or build facilities to take advantage of the proximity to natural gas, according to this article from Knowledge@Wharton. That’s sure to mean opportunity for distributors.

According a PWC report, Shale Gas: A renaissance in U.S. manufacturing?, continued lower feedstock and energy costs from shale gas could also be a boon to U.S. manufacturers in the following ways:

  • Energy affordability .Lower costs could help manufacturers reduce natural gas expenses by as much as $11.6 billion each year through 2025.
  • Demand growth. In 2011, 17 chemical, metal and industrial manufacturers commented in Securities and Exchange Commissionfilings that shale gas developments drove demand for their products.
  • More jobs. U.S. manufacturing companies could employ approximately 1 million more workers by 2025 due to benefits from affordable energy and demand for products used to extract the gas, according to the report.

While many companies have already increased their natural gas usage, it remains to be seen whether continued shale gas extraction en masse could truly realize these predictions.

Read more about trends in this market in this recent piece from Knowledge@Wharton: The Once and Future Shale Gas Revolution

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!

2

articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events

1

article
left

You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.