EU WILL LOSE
Cheap natural gas has delivered a significant boost to US manufacturing exports, the International Monetary Fund has found.
Advances in shale rock drilling have led to a sharp rebound in US gas production, driving prices in the US to a steep discount to markets in Europe and Asia. US gas sells for $4 per million British thermal units, compared with $10 in Europe and close to $18 in Asia.
The price gap has led to a 6 per cent average increase in US manufactured product exports, the IMF wrote in its twice-yearly World Economic Outlook.
While energy costs generally represent a relatively small share of total input costs, "the lower natural gas price in the United States, which is likely to persist, has had a noticeable effect on US energy-intensive manufacturing exports," the IMF report said.
Lower prices for natural gas favour energy- and gas-intensive industries, such as steelmaking, oil refining, and nitrogen fertiliser production. The International Energy Agency has previously warned that Europe will lose a third of its share of global energy-intensive exports over the next two decades because its energy prices will remain stubbornly higher than those in the US.
According to the IMF, a 10 per cent fall in the relative price of US gas leads to an improvement in US industrial production relative to Europe of roughly 0.7 per cent after 1½ years.
"As more countries exploit new sources of natural gas, not only is the geography of trade in energy products likely to continue to change, but the geography of manufacturing exports is likely to change as well," the IMF said.
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