Energy giving US economy competitive advantage

Sunday Telegraph:

...

The excess supply created by America’s shale revolution has been disguised in recent years by capacity reductions in war-torn countries such as Libya. But the producers’ luck has run out this year as supply has picked up around the world even as China’s slowdown and stagnation in Europe and Japan has reduced demand.

The jockeying for position by Saudi Arabia and others might sound like a game, but it really matters. With world oil exports amounting to around 40m barrels a day, the $40 drop in the oil price since June represents a transfer from oil exporters to oil consumers of more than $400bn a year.

US consumers have an extra $70bn in their pockets, money they used to spend on fuel and can direct towards eating out, buying electronic gizmos or going on holiday.

Even with the usual lag before consumers see the benefit of falling petrol prices, we are starting to feel the impact. Last week’s revision to third quarter US GDP, from 3.5pc to 3.9pc, was in part a reflection of more confident consumers with higher disposable incomes.

Americans’ increased purchasing power could hardly have come at a better time, as the annual Black Friday and Cyber Monday consumption splurge gets under way.

With consumption accounting for two thirds of the US economy, this is one key benefit of the oil price slide. But it is not the only one. Cheap energy is rapidly replacing cheap labour as the key differentiator between countries competing for investment in a global marketplace. As emerging markets’ wage bills rise, America’s energy advantage becomes ever more significant.

Europe, which missed out on the first big shift, looks like being squeezed as badly by the second. No wonder companies like BASF are choosing to build any new chemical capacity on the shores of the Gulf of Mexico and not the banks of the Rhine.
...

Manufacturing jobs are coming back to America to take advantage of the low priced energy.  It is something Obama never imagined.  He thought alternative energy would lead to a restoration of manufacturing jobs, but to the extent those jobs still exist most are in China and elsewhere.  What Europe has found is that alternative energy is expensive and unreliable.  That is why some European manufacturers are building plants in Texas.