“Formula For Worry”

By May 28, 2007Energy

Blog-Icon-MI.jpg“Formula For Worry” is the headline out of Milwaukee and it’s highly appropriate.

Milwaukee Journal Sentinel reporter Rick Barrett has read our recent report on chemical costs and the disappearing US chemicals infrastructure and found that it really resonates with Wisconsin manufacturers. His subtitle catches the thrust of our new report: high prices could send work offshore.

Our report is based on a recent survey of manufactures that finds that the majority use chemicals in their manufacturing operations and are pessimistic about the rising costs and shrinking availability. Most see it getting worse in the near future and many see their only option is to move their production offshore too. US chemical manufacturers are literally being forced out of the United States by governments’ lack of attention to a sensible natural energy policy.

High paying jobs in a wide cross section of industries are at stake. Why not more of an outcry over this and why aren’t US leaders shaping something to forestall this trend? Enabling greater supplies of natural gas would bring US natural gas pricing back to mid-1990s levels when US natural gas pricing was a competitive international advantage for US producers. No more. Failure to permit new supplies to come on line while demand has risen, has created an unhealthy environment.

Barrett talked with a number of Wisconsin manufacturers and found that this is already cascading down on them. Here’s a few to ponder:

  • It takes a lot of petroleum to make synthetic rubber, added John Valek, president and chief operating officer of RB Royal Industries, a Fond du Lac company that makes hose and tube assemblies for a variety of uses.
    “Many of the chemical cost increases are directly related to oil and gas prices,” Valek said.
  • Even companies that don’t use a lot of chemicals, such as metal fabricators, are worried about the costs of welding gases, solvents, lubricants and hazardous material shipping charges.”You have to watch those costs or you will get eaten for lunch,” said Eric Isbister, chief executive officer of General MetalWorks Corp., in Mequon.
  • Wisconsin is a major manufacturing state and there is good reason for concern there. Rick Barrett captured it well:

    In Wisconsin, thousands of factories use chemicals to make everything from baby diapers to building materials. Sometimes the dependence on chemicals is extreme, as in the case of polyethylene used for plastic products.

    The plastics industry is an integral part of Wisconsin’s economy. The state ranks 10th in the nation for employment in plastics manufacturing and 12th for plastic shipments, which total more than $10 billion a year, according to industry sources.

    If I were an elected official, I’d sure make a sensible natural gas policy my first priority and not just take the manufacturing economy for granted.