The practice of hydraulic fracturing has been called a profound technology innovation, one of the most profound in the 20th century. Hydraulic fracturing has provided access to vast new supplies of domestic oil and natural gas.
The International Energy Agency (IEA) estimates the United States will overtake Saudi Arabia sometime around 2020 as the world’s largest oil producer; and that by 2030 will be a net exporter of oil. The projections for natural gas are more profound, estimating the US will be a net exporter by 2020.
Industry executives and consultants have been extolling the benefits that the natural gas boom will provide US manufacturing. They refer to the boon as a huge competitive advantage. The increased supply will lower prices for domestic consumption while foreign competitors will be importing and paying more. This refers to natural gas as both a heating source and as a raw material for processing chemical products. In a report they issued, Boston Consulting Group said that by 2015, US companies would enjoy a cost advantage of 60% to 70% for Natural Gas compared to Europe and Japan; and electricity will be 40% to 70% cheaper than for the US manufacturing’s trading partners.
The biggest factors for injection molders seeing a benefit will be time and policy. The Energy Information Agency shows a graph where Total energy costs for manufacturers fell by 11% between 2006 and 2011, but that result was driven by a 36% decrease in natural gas prices. That same report shows electricity rising 3% in that period. Injection molders use electricity as their prime energy source. We use it for powering our injection molding presses and ancillary equipment. Some of us have natural gas heat for our facilities, but the heat generated by our molding equipment in many cases means our plants use little to none of our HVAC capabilities.
From a Wall Street Journal Article, “Coal-burning facilities are expected to slip to 10% of total new capacity in the U.S. in 2013, down from 18% in 2009, the U.S. Energy Information Administration reports. Gas, meanwhile, is expected to soar to 82% of new capacity in 2013 from 42% last year.” As such, power generation plant conversion from coal to natural gas, or coal plants closings with new natural gas plants coming on line will be the determining factor of when injection molding will be jumping on the energy gravy train.
Injection molders will be downstream from the benefits of lower natural gas prices, both in power use and in raw material processing. Because of the natural gas boon, chemical manufacturers are planning major expansions or construction in the US. In theory, these plants mean access to lower priced ethylene for plastics manufacturers. As such, they should see lower operating costs and better margins. Passing those products through compounders that make the higher engineered resins and then their distributors mean savings may be somewhat muted by the time injection molders are making their purchases.