According to many commentators, cheap natural gas is producing a renaissance in U.S. manufacturing and putting European competitors at a disadvantage. But empirical studies show the impact has been small and concentrated in a handful of energy-intensive industries that account for only a small share of manufacturing value-added.
Cheap gas has produced big benefits for most energy-intensive industries but for the rest of the U.S. manufacturing sector the impact has been modest.
Following a detailed study of industry-level data, economist William Melick concluded: “The roughly two-thirds decline in the price of natural gas in the United States relative to the price of natural gas in Europe (over the last nine years) has boosted activity in the manufacturing sector as a whole by perhaps two to three percent.”
“For the handful of industries that are heavy users of natural gas, the estimated effects are much larger, on the order of a 30 percent or larger increase in activity,” he explained in a working paper published by the Federal Reserve (“The Energy Boom and Manufacturing in the United States,” June 2014).
Read more: Reuters