The fracking boom has changed America’s energy landscape for the better. It has made natural gas much cheaper than before.
It has also had an effect on the entire petrochemical industry. It has made the feedstocks for plastics much cheaper. That along with a growing middle class around the world are set to create a petrochemical boom in the U.S.
From the Wall Street Journal:
When new parents in Rio de Janeiro buy baby food in plastic containers, they are bringing home a little piece of the U.S. shale revolution.
That boom in drilling has expanded the output of oil and gas in the U.S. more than 57% in the past decade, lowering prices for the primary ingredients Dow ChemicalCo. uses to make tiny plastic pellets. Some of the pellets are exported to Brazil, where they are reshaped into the plastic pouches filled with puréed fruits and vegetables.
Tons more will be shipping soon as Dow completes $8 billion in new and expanded U.S. petrochemical facilities mostly along the Gulf of Mexico over the next year, part of the industry’s largest transformation in a generation.
The scale of the sector’s investment is staggering: $185 billion in new U.S. petrochemical projects are in construction or planning, according to the American Chemistry Council. Last year, expenditures on chemical plants alone accounted for half of all capital investment in U.S. manufacturing, up from less than 20% in 2009, according to the Census Bureau.
You would think this is good news for Louisiana. After all, the state has a large petrochemical industry. However, Louisiana is mostly missing the boat on this.
Louisiana continues to miss the petrochemical infrastructure improvements that are going to be needed to take advantage of this boom. Earlier this year, Texas beat out Louisiana for a $10 billion new chemical plant.
Why is Texas going to benefit more from the fracking boom than Louisiana? Because unlike Louisiana, Texas is not hostile to the oil and gas industry. That state is improving its business climate while Louisiana is making its climate more and more inhospitable for business.
Policy matter and that’s why Texas and other Gulf South states are poised to benefit more than Louisiana from the fracking and plastics boom.