US says chemicals output will remain closely linked to natgas

23 April 2014 19:20  [Source: ICIS news]

WASHINGTON (ICIS)--US bulk chemicals production will remain strongly linked to natural gas prices and availability over the next quarter-century, the Department of Energy said on Wednesday, more so than many other major energy-intensive industries.

In a report on the impact of natural gas prices on industrial production, the department’s Energy Information Administration (EIA) noted that a wide range of US energy-intensive industries stand to benefit over the next 25 years if domestic production of natural gas continues to be abundant and gas prices consequently are kept low.

The EIA said that energy-intensive industries such as food, paper, bulk chemicals, glass, cement, iron and steel and aluminium are the industries that use the largest amount of energy per unit of output and are the most sensitive to natural gas prices.

“Of these, the most natural gas-intensive industries are food, paper, bulk chemicals and glass,” the report said.

“Analysis of the industrial sector as a whole reveals strong links between natural gas prices and industrial production,” the EIA said. But the report noted, however, that the link is most pronounced in the chemicals sector.

Studies show evidence “of a straightforward production decline when natural gas prices to the bulk chemicals industry increase”, the report said, noting that the natgas price link relationship does not appear to apply to less gas-sensitive sectors such as the cement industry.

In projecting potential industrial growth out to 2040, the EIA analysis says that in the event the US continues to enjoy high output of oil and natural gas, “total industrial output is 5.1% higher in 2040, and bulk chemicals and paper industries output is 11.5% higher in 2040, as a result of improved trade advantages resulting from lower prices”.

However, if domestic US oil and gas production should decline over the next 25 years, “bulk chemicals and paper industries output is 5% lower in 2040”.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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