Friday, July 28, 2017

Why I Love To Blog: The Energy Gap Is Only Going To Get Wider -- July 28, 2017

The other day I listed the reasons why I was inappropriately exuberant about the US economy: #1 - Energy.

Now, today, another throw-away article over at Yahoo!Finance: the real reason why overseas manufacturing is coming to America.
As the world’s largest contract electronics maker, Foxconn operates 12 factories in China. It has faced criticism in the past for paying its workers minimum wage and requiring them to work long hours. In 2010, Foxconn doubled the monthly salary to $290 month after reports emerged that at least 10 workers had committed suicide.
Since then, though, it’s gotten more expensive to manufacture goods in China. In the past five years, wages in China have grown about 10% to 15% every year, while the increase in the US is about 2.5%.
Boston Consulting Group says industrial electricity prices in the US are 30% to 50% lower than in other major export nations [Japan, Germany, South Korea].
Foreign manufacturers that make products in the US also save money on shipping time and cost since many customers are here. Overall, China’s manufacturing cost advantage over the US shrank from 14% in 2004 to only 1% in 2016.
The energy gap is only going to widen. England is pretty much out of the energy picture. France bans fracking. Spain nearly went broken promoting solar energy. Japan is going back to coal. Germany doesn't know what it wants to do (except re-elect Angela Merkel). 

2 comments:

  1. Price (and, increasingly, availability) of electricity will loom larger in global economics as the build out of CCGT plants in the US is in sharp contrast to the offshore whirley development favored by the Europeans.
    The economics and operational aspects so strongly favor the US that the Europeans, and - possibly the Australians - are jeopardizing their very societies by ... (ready?) chasing windmills.

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    1. Wow, "chasing windmills." The original book was written by a Spaniard. Pretty funny.

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