Skip to Content

Cheap Natural Gas Boosts Manufacturing

Companies that use natural gas as a raw material find the U.S. an increasingly attractive place to be.
September 16, 2014

The fastest-growing slice of the U.S. manufacturing sector today is not being driven by automation or cutting-edge robotics but instead by cheap, plentiful natural gas unleashed by fracking shale deposits.

From 2011 to August 2014, the American Chemistry Council, the trade association of the chemical industry, tallied 196 announcements of new chemical plants or upgrades to existing ones in the United States, with investments totaling $124 billion. Huge petrochemical companies such as Saudi Basic Industries, Dow Chemical, and Chevron Phillips Chemical Company are among the investors. Texas is undergoing the largest expansion of petrochemical manufacturing since the 1960s, and other gas-rich parts of the country, including Pennsylvania and the Ohio Valley, are benefiting too.

“Ten years ago everyone was talking about projects in the Middle East,” says Fernando Musa, CEO of Braskem America, a Philadelphia-based subsidiary of the Brazilian thermoplastic resin leader. “Now if you go to industry forums in the U.S., Europe, or Asia, everyone is talking about investing here in the U.S.”

“Ten years ago everyone was talking about projects in the Middle East. Now… everyone is talking about investing here in the U.S.” —Fernando Musa, CEO, Braskem America

Many of these investments are from companies that use natural gas instead of petroleum as a raw material, such as the large petrochemical producers. But cheap natural gas is also offering the prospect of lower electricity costs, which gains the attention of a broad spectrum of manufacturing. The U.S. Conference of Mayors expects employment in energy-intensive manufacturing to grow 1 percent a year through 2020. Steelmaker Nucor has opened a plant in Louisiana that will use natural gas to strip oxygen from iron ore, a classic manufacturing technique that, before the shale boom, had been too expensive for the company to do in the U.S. Tire companies that had largely moved manufacturing to China in recent decades have now announced eight new U.S. plants, including new Bridgestone and Michelin facilities in South Carolina.

U.S. manufacturers could see their energy costs drop by more than $20 billion a year by 2030, according to consulting firm PwC. That could benefit electricity-intensive advanced manufacturing plants, but for many advanced manufacturing facilities the potential savings from cheap electricity are secondary to other considerations.

Samsung Electronics, which operates semiconductor fabrication plants in Austin, Texas, pays close to $60 million a year in electrical bills, says general counsel Catherine Morse, but its recent decision to invest $4 billion mostly in new tooling at the site had nothing to do with electricity prices. Its energy supplier, Austin Energy, relies extensively on solar and wind power, so cheaper gas has a limited benefit for Samsung.

The investment was primarily motivated by an interest in expanding the existing plant’s expertise in logic chips, the chips that control the operation of digital devices. “We do benefit from lower natural-gas prices,” says Morse. “But that’s not driving our investment.”

Keep Reading

Most Popular

DeepMind’s cofounder: Generative AI is just a phase. What’s next is interactive AI.

“This is a profound moment in the history of technology,” says Mustafa Suleyman.

What to know about this autumn’s covid vaccines

New variants will pose a challenge, but early signs suggest the shots will still boost antibody responses.

Human-plus-AI solutions mitigate security threats

With the right human oversight, emerging technologies like artificial intelligence can help keep business and customer data secure

Next slide, please: A brief history of the corporate presentation

From million-dollar slide shows to Steve Jobs’s introduction of the iPhone, a bit of show business never hurt plain old business.

Stay connected

Illustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at with a list of newsletters you’d like to receive.