Cheap natural gas boosts US manufacturing

The surge in its production of shale gas has made the United States the largest natural gas producer in the world, and it is expected to join the legion of liquefied natural gas exporters and even become a net
exporter of natural gas later this decade (U.S. EIA 2014). With surging supply and weak demand, natural gas prices in the United States have fallen sharply in recent years and are effectively decoupled from those in the rest of the world. In particular, prices in Asia and the European Union have risen, partly because of the indexation of imported natural gas prices to oil prices. So far, energy users in the United States have been the main beneficiaries of the energy price declines that have resulted from the U.S. shale revolution. However, that revolution has helped to stabilize international energy prices, including by freeing global energy supply for European and Asian markets, thus offsetting some of the shortages attributable to geopolitical disruptions. Also, the U.S. shale boom has displaced coal from the United States to Europe, lowering energy
costs in the latter.

Cheap natural gas has delivered a significant boost to US manufacturing exports, the International Monetary Fund has found. Advances in shale rock drilling have led to a sharp rebound in US gas production, driving prices in the US to a steep discount to markets in Europe and Asia. US gas sells for $4 per million British thermal units, compared with $10 in Europe and close to $18 in Asia.

The natural price gap has led to a 6 per cent average increase in US manufactured product exports.

The IMF have a 24 page working paper The U.S. Manufacturing Recovery: Uptick or Renaissance?

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