Cost of Making Stuff

[xoxoxoBruce]

Speech by John Engler, head of the National Association of Manufacturers.
Now this guy is bias, that's his job, putting forth the manufacturers point of view. But he did present some interesting points.

Manufacturing in the U.S. generates about $1.4 trillion, or 12 percent of our gross domestic product, accounting for nearly two-thirds of this nation’s industrial research and development, three-fourths of our nation’s exports and supports more than 20 million high-paying jobs.

In Pennsylvania, manufacturing is an even larger share of the economy, representing 16 percent of the gross state product and employing 677,000 people – yes, fewer than in years past, but still a powerful presence.

So if 75% of our exports come from an steadily decreasing manufacturing base, it seems to me that the trade imbalance will just get worse.

PPG Industries provides a good, and striking, example of the business consequences of high energy prices. Every time the price of natural gas increases by another dollar, it results in an unbudgeted expense to the company of $70 million.

At U.S. Steel, John Surma tells me a dollar increase means $80 million in additional company costs – for the steel industry as a whole, it’s $300 million.

The chemical industry, which relies on natural gas both for energy and as a feedstock, has lost 100,000 jobs and $50 billion in business largely because of rising energy prices.

OK, the rising cost of energy is kicking us all in the butt, but what to do about it?

When it comes to oil, you often hear talk about a Strategic Petroleum Reserve. We also have another reserve – this one unplanned – for natural gas. It’s called the Outer Continental Shelf. OCS may have enough natural gas to heat 100 million homes for 60 years, and enough oil to drive 85 million cars for 35 years.
With modern technology and corporate commitment, the OCS can be explored and developed in an environmentally sound way.
Unfortunately, a federal moratorium now blocks almost all new OCS drilling. Meanwhile, Cuba moves ahead.
Yes, Cuba. When you hear objections from the environmental lobby about the risk of exploring deep waters off the Florida coast, you should know that Cuba has licensed foreign firms to develop gas resources in waters as close as 60 miles to the U.S. shore. In years ahead, that Cuba-backed drilling could come as close as 45 miles.
To me, it makes no sense for Venezuelan or or Chinese firms to be partnering with their Cuban friends to drill 45 miles off our coast while Florida Senators want U.S. companies to stay 260 miles off our shores.

Manufacturers are particularly concerned about natural gas because that's a domestic product, not imported, except from Canada.

Our solutions must also include Alaska. The Arctic National Wildlife Refuge, or ANWR, holds as much as 8.6 trillion cubic feet of natural gas and 10.4 billion barrels of oil, resources we can access through development on just 2,000 acres of the Alaskan slope.
Two thousand acres. That’s it. The entire area of ANWR is the size of South Carolina, the area to be explored about the size of the Dulles Airport in Washington. A better way to understand the impact of ANWR is this: (Hold up Wall Street Journal) If the front page of this Wall Street Journal were ANWR, the developed area would be a single letter. A single letter.

I think that's a little misleading by just using total area. I believe that area is split into many spots with the potential of screwing up a large area. But, I've seen what they did on the North Slope and it's not bad at all.
Of course conservation must be a key player.

The objectors will continue to object, the opponents oppose, saying that we can solve our energy crisis just through conservation or efficiency alone.

Of course, manufacturers already embrace energy conservation and efficiency. Across the nation, manufacturers are heavily investing in measures to reduce their energy consumption.

Manufacturers across America are leaders in conservation. But you cannot power a forge or heat a warehouse or fuel your trucks through conservation. The supply and demand equation requires supply.

I can see they are looking for relief without stepping on Big Energy toes, but realistically, enforced conservation is distasteful to many and voluntary conservation hasn't panned out. Alternatives, Coal, Nuke, etc, hold the most promise, in my mind, but I could be dead in a couple years so It's not up to me.

This audience will not be surprised to learn than liability costs continue to increase, up 5.9 percent in 2004 from the year before.
But the total figure is still hard to believe. For 2004, tort costs reached $260 billion – the equivalent of $886 for every man, woman and child in America.
Perhaps the more telling comparison is this: Tort costs represent 2.2 percent of our nation’s Gross Domestic Product, the highest among all industrialized countries. As a percentage of GDP, it’s twice our nearest competitor. In raw numbers, we spend SEVEN TIMES what our nearest competitor spends.
This nation is litigating away its economic advantages.

Big problem and much of it started with backlash to the "Robber Barons" running roughshod over the masses. But damnit, it's gotten way out of hand.
I keep reading about people doing stupid things and being rewarded with big bucks. Insurance Companies and Corporations settling to avoid litigation costs.
I firmly believe workers getting hurt on the job should be taken care of but huge punative damages because somebody bought your chainsaw and cut their head off with it has got to stop.

Once again, this speech was the manufacturers point of view but that doesn't invalidate their concerns.

[skysidhe]

There is a C N N special on 'worst case' senario for an oil shortage beginning in 2009.

I don't think it will be all out chaos. Maybe controlled chaos like rationing. The world has been through rationing before.

So what does your learnings say about alternate fuels and the cost for production? I didn't see any projections.


I should have bought that electric motercycle instead of my last car just for this oil shortage reason but then I got a scary thought. Ok what if we had a shortage and like this CNN presentation it's like that movie Mad Max and I have to protect my cycle from transportation hungry marauders. :P

[tw]

Originally Posted by skysidhe

There is a C N N special on 'worst case' senario for an oil shortage beginning in 2009.

I don't think it will be all out chaos. Maybe controlled chaos like rationing. The world has been through rationing before.

So what does your learnings say about alternate fuels and the cost for production? I didn't see any projections.

There is no shortage. And there is no viable alternative to petroleum for transportation - no matter how much an MBA president spins lies such as hydrogen.

There are realities. Current reserves are being depleted faster than they can be replaced. The easy oil is long gone. For example, take an oil field outside of Bakersfield CA. Crappy oil that takes massive control systems and refining to recover. The price of oil was never cheaper in the entire history of mankind as it was in the 1990s. Now that prices are returning to normal, that CA oil is available.

Great advantages created by computers and computer related technologies have been used to waste vast amounts of energy in very inefficient machines. Prices must climb steeply to recover expensive and previously unavailable oil.

Meanwhile the largest expenses are not getting the stuff. The most expensive part is damage created by massive burning of the stuff AND other related expenses such are as thousands of dead and delimbed Americans every year. With a mindset that "it is our oil", then expect a severe economic downturn and other realities to restore sanity.

One need only review history. Price of gas went from $1.90 in the late 1960s to about $3.10 in the first oil shock (all numbers in 2006 dollars). Americans kept buying gas guzzlers anyway. Also has happened today. Tahoe and Suburban sales are at record highs because price of gasoline is not yet high.

I paid $0.90 per gallon in Jan 2002. Price has simply tripled in but four years AND still the sales of gas guzzlers increased.

In the second 1970s oil shock, price of a gallon went to about $6.00 (2006 dollars). Only then did Americans finally decide that maybe we must innovate. Only then did we begin using technologies in 1980s that were available in WWII and ready for production during 1960s.

There is no shortage of oil. And there is no viable alternative to petroleum based fuels. But costs must return to acceptable levels before America will actually 'feel' that energy has value. Today, based upon history, and by using numbers: gasoline is still cheap and must become expensive before we address that problem seriously.