Manufacturing Output Soars With Increased Energy Consumption of Low Priced Natural Gas

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EIA has reported new preliminary data that shows the total U.S. manufacturing energy consumption increased about 3.7% between 2010 and 2014. This is the first measured 4-year increase in manufacturing energy consumption since 2002. Energy source shares have changed modestly since 2002, with natural gas rising from 29% to 33% of all manufacturing energy consumption. Natural gas consumption in manufacturing increased 2% between 2010 and 2014. The price of natural gas continues to be low relative to many other available alternatives, and it has the lowest carbon content of the fossil fuels. In fact, several manufacturers reported renovation projects in 2014 that would permanently convert residual fuel oil equipment, a common alternative, to natural gas. They cited lower natural gas prices and preparation for expected changes in federal or state environmental regulations in their rationale to switch fuels. Conversely, during this same period, the share of delivered energy to manufacturing from coal, coke and breeze declined from 10% to 8%, while the share of fuel oils and naphtha together decreased from 7% to 5%.

While manufacturing energy consumption did increase overall from 2010, the increase was not as large as the increase in manufacturing output during that same period, implying a decrease in energy intensity. Manufacturing gross output rose 12% from 2010 to 2014. That rise outpaced the 3.7% increase in energy consumption, implying a decline in energy intensity. The output index represents gross output as a measure of an industry’s sales, including sales to other industries as well as final users. Once final 2014 MECS results are released, more data will be available to determine what factors and manufacturing activities are contributing to the intensity decline. For example, besides real efficiency gains, the overall manufacturing intensity decline may be attributable to a change in the proportion of high energy-intensive industries (e.g., primary metal manufacturing) to lower ones (e.g., textiles and machine assembly).