to pre-recession levels and settles it into a more natural position. The
good news is that interest rates for auto loans should remain low, at
between three and four percent.
Chemical: Upstream Fortunes, Downstream Gains
In 2013, oil and natural gas production added $240 billion to its seven
percent ($1.1 trillion) slice of the U.S. GDP. Oil deposits like the Bakken
formation in North Dakota, as well as those found at the Eagle Ford,
Texas site contributed mightily to these numbers.
However, due to its impact on downstream manufacturing, the
large natural gas deposits in North Texas and the Marcellus Shale could
represent the most significant economic gains. High natural gas production translates to lower prices along a number of fronts, including
chemical processing functions that use natural gas in forming resins,
plastics, composites, coatings, chemicals, and other related products.
This type of production plays a key role in supporting other manufacturing. For example, according to the American Chemistry Council,
96 percent of all production relies on chemicals of some sort. More
specifically, the ACC states there is nearly $3,500 of chemical products
in every light vehicle produced, and about $15,000 of chemical products in every housing start-up.
This is why the chemical segment is often described as the economic
canary in the coal mine. Due to its early position in the supply chain,
chemical industry activity can be used to anticipate fluctuations in the
overall economy. Current signals show slow but steady economic growth
into 2014 and beyond.
The ACC states in their Year-End 2013 Chemical Industry Situation and
new production. Increased manufacturing and export activity will drive
demand for basic chemicals, especially those segments in which the U.S.
now enjoys a competitive advantage, due to the aforementioned shale
Specifically, these cost savings have driven the need for imported gas
and oil down, which has helped spawn 135 new chemical production
projects valued at over $90 billion heading into 2014. The development
of local shale gas has moved the U.S. from a high-cost chemical manufacturer to among the lowest in the world, with some of the biggest
beneficiaries being producers of agricultural chemicals, petrochemicals,
plastic resins and synthetic rubber.
Due to these gains, American chemical companies, especially petrochemical manufacturers, have been able to increase capital spending by more
than ten percent in each of the last three years. The ACC is projecting that
investment should continue to climb by eight percent through 2016, and by
2018 overall capital spending for this market will have doubled from 2010.
American chemical companies, especially petrochemical manufacturers,
have been able to increase capital
spending by more than ten percent
in each of the last three years.