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While still early in the year, President Trump’s promised return of U.S.-based manufacturing seems to have found a solid beginning.
The key to the current U.S.-based manufacturing reversal is the development of greater cost-effectiveness, which has shrunk the benefits of out-sourcing immeasurably. This previous unavailability, now provided by technological production methods, has reduced the number of employees needed to complete manufactured finished goods.
This availability, requiring fewer employees in the “in-between steps,” has greatly added to cost lowering and quality of many products that had previously been transferred overseas since the beginning of this century.
This advantage of U.S. technology and manufacturing ingenuity has allowed today’s manufacturing assembly lines to become more effective — reversing imports to “home base,” and even exports in the growing numbers of manufacturing opportunities.
Although the many technological components that make “made in the U.S.A.” more desirable are still in the developmental stage, they are geared to greatly broadening the finished products and distributing them in the U.S. Lower labor costs promise opportunities in many manufacturing categories, that conglomerates had transferred overseas in the last few decades. Also, the new factories housing the technological developments are themselves restructured to be more cost-effective by virtue of up-to-date technology.
The greatest holdup in accelerating this upgrading in the shortest possible time period relates to the shortage of skilled labor to fill the new positions. Bringing advanced technology into voluminous utilization may take more or less time, depending on the services with which such programs are pushed by the federal government and major business sector levels. This responsibility will fall on the White House and a supportive Congress to give American manufacturers the benefits of advanced technology more quickly.
A successful outcome within the next year could make the difference between a time-consuming level and the roaring success of domestic manufacturing return that would be possible in the most successful cases.
To be realistic, this success will likely take place in the next few years. But in combination with helpful tax benefits, the acceptability of such changes by the end of this decade could tip the scales in favor of a cost-effective and accelerated “new” U.S. manufacturing success.
Will U.S. oil, natural gas top the world?
While oil and natural gas were major U.S. import commodities, as late as the first decade of the current century, no forecaster dreamed that would be reversed in lightning speed, as the second decade of the 21st century was unveiled.
America’s fast-growing population (330 million) had become increasingly dependent on the OPEC cartel, especially Saudi Arabia, Venezuela and Nigeria to supply the needed 20 million barrels of oil per day. Also, America’s oilfields, centered in the Southwest and Alaska, were drying up to a level barely exceeding 3.4 million barrels a day, and fading as late as 2011.
Then, like a bolt out of the blue, cost-effective hydraulic fracturing (fracking) appeared on the American scene, jumping total U.S. production to over 10 million barrels a day. Fracking had been technologically discovered more than 50 years before, but was not seriously considered, due to previous high costs versus imports from the Saudis and Venezuela.
The lowered shale costs of fracking happened to coincide with global Brent crude import prices of more than $100 per barrel as late as mid-2014. This price level seemed permanent, due to the OPEC hold on much of the world’s market, together with Russia, whose pipelines, installed during the Soviet Union domination (1945-90) took care of most of Europe.
However, U.S. engineers, working in concert with leading American producers, were able to bring “fracking” cost down to $60 a barrel. Suddenly U.S. shale appeared throughout much of the Southwest oil sector, which had worked diligently to reduce costs. This ignited a price drop in mid-2014 from $100 per barrel to half that amount, which played havoc with OPEC; notably Saudi Arabia, and Russia (both countries who produced 10 million barrels per day), and we became economically dependent on these price/production levels.
Although OPEC and even Russia hurried to cut back production to preserve profitable pricing levels, these producers of global Brent crude barely moved prices back to $60 per barrel, as U.S. shale oil became increasingly prevalent. On the other hand, while the new surge of oil shale projected dramatic volume increases, America’s newfound “fracking” capability, and its supplemental natural gas growth, once flared off due to lack of conversion to liquids, is moving forward.
Six new ports along the Gulf of Mexico are in various stages of export capability, and natural gas liquidity is in the process of doubling U.S. oil production. The new ports will propel the U.S. into world leadership in both categories. Such export opportunity was given a tremendous forward push when President Obama agreed to lift the oil embargo, to gain approval for the new last budget in his waning days as president.
This has already resulted in major shipments early in 2018 to the Pacific nations of China, the Philippines, and even India, whose refiners prefer the “light” West Texas Intermediate (WTI), due to the lack of sophisticated refineries needed to process the heavier Brent crude, emanating from most of the rest of the world.
Together with the new tax bill, approved by Congress and President Trump’s desire to close the yawning trade deficit, the combination of these factors practically assures the U.S. as the world’s leading producer of oil and natural gas before the end of this decade. Add to that the growing conversion to liquid natural gas and the unprecedented amount of financial liquidity flowing into the U.S. from other countries should assure a more balanced import/export balance. These factors will combine to close the ever-widening trade gap, underscoring the strength of America’s economic growth.
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