Researching a piece for a client about the impact of energy cost spikes on business, I came across a staggering piece of data about gas prices. As a result of fracking, the cost per therm of gas in the USA is about half what we pay. And this may be about to get worse: http://www.bbc.co.uk/news/business-22524597.
Good news if you are an American manufacturer or consumer, but frightening news for the UK, Europe and the rest of the world. Let’s just look at the situation from the perspective of a steel maker or aero engine manufacturer. If energy is a major cost to your business then, in the longer term, the USA looks a better location for your business. Not just this business, but a whole cluster of business that serve the prime manufacturer.
Efficiency is a moderating factor. If energy is cheap then US manufacturers are likely to be more profligate. If energy is expensive, then the UK manufacturer is likely to run a tighter ship and use the resource more efficiently. But this can only make a marginal difference.
Capital investment and transport costs are also considerations. Steel plants are major investments amortised over perhaps a 20 year working life. No steel maker is going to abandon UK capacity overnight, but faced with low-cost competitive US product there comes a point where only the additional cost of shipping from the US makes it viable to keep UK production going.
As a technical content creation/PR company we find debates like this deeply engaging. Technical issues are not dull. If you have issues that face your business and need a partner to help structure the argument and make your case to industry, government or the wider public why not give us a call?
Apologies to Fred Hoyle for using the title of his thought provoking book about energy in modern society: ‘Energy or Extinction – the Case for Nuclear Energy’. There is a powerful argument that Hoyle was wrong in some of his conclusions, but he did pinpoint the correlation between living standards and energy use.