The Energy Boom and Manufacturing in the US
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The Energy Boom and Manufacturing in the US

William R. Melick
Federal Reserve Board, 2014
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8

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  • Innovative

Recommendation

Economic shocks can be both good and bad. While negative jolts usually get most of the attention, positive shocks can be just as critical to an economy. Since 2006, the United States’ positive shock has been the rocketing supply of natural gas and its plummeting cost. Economics professor William R. Melick has gleaned data to address the questions of how the economy of “Saudi America” is adjusting to lower energy costs and whether cheap natural gas is paving the way for another golden age of US manufacturing. getAbstract recommends his study of the broad economic effects of low energy prices on American investment, jobs, imports and exports particularly to manufacturing executives and energy specialists.

Summary

Since 2006, when the American hydraulic fracturing boom began in earnest, US natural gas prices have dropped to about one-third of European levels. In theory, a “positive supply shock,” such as significantly lower energy prices, should cause an increase in manufacturing activity, a lowering of costs and additional employment; US exports of manufactured goods should logically grow, as should investments in new and growing businesses, while imports should fall.

In attempting to measure energy cost effects on the overall economy, researchers...

About the Author

William R. Melick is a professor of economics at Kenyon College in Ohio.

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