Since 2016, orders for U.S.-made oil and gas field machinery have yet to eclipse $2 billion in any month, Rystad Energy senior vice president Matthew Fitzsimmons revealed in a recently sent market update in Rigzone.
In the update, Fitzsimmons noted that these orders reached record highs between 2010 and 2014, “sustaining monthly new orders near $3 billion.”
“Adjusting for inflation, the picture looks even bleaker: new orders in the first quarter of this year are nearly a third below the average between 2010 and 2014,” Fitzsimmons said in the update.
“In absolute US dollar terms, new orders in the first quarter of this year exceeded $1.7 billion per month, the highest since the second quarter of 2015,” he added.
“When adjusted for inflation, however, they are below new orders in the first quarter of 2020 before the start of the pandemic later this quarter,” he continued.
Contractionary, or stale, trends have also been seen when new U.S. manufacturing orders normalize for industrial machinery, electrical equipment and power transmission equipment such as turbines and generators, Fitzsimmons said in the update, and he added that none has had substantial inflation. normalized growth since the early 2000s.
“While technological advances have helped, they have not compensated for increased labor costs,” he said.
“U.S. manufacturing activity is also strongly influenced by the strength or weakness of the U.S. dollar relative to other currencies,” he added.
“As the US dollar strengthens, goods made outside the US become more cost competitive,” he continued, noting that between 2002 and 2007, the weak dollar was a major factor which contributed to the increase in national manufacturing activity.
“Over the past two years, the dollar has been abnormally strong, creating a significant cost disadvantage for American manufacturing against international orders,” Fitzsimmons said.
Low carbon manufacturing
The global low-carbon manufacturing opportunity pool is significant and growing rapidly, Fitzsimmons said in the update.
“Although the US is well positioned for domestic wind equipment manufacturing, this work has required a heavy reliance on imports of foreign manufacture,” he noted.
“The domestic supply chain was going to take advantage of credits from the Inflation Reduction Act to better compete for international orders,” he added, warning in the update that if the US debt ceiling negotiations undermined incentives of the law’s low-carbon supply chain, “the global competitiveness of American manufacturing will have a significant impact.”
According to Fitzsimmons, investments in 2023 will grow more than 25 percent year-over-year for onshore and offshore wind, as well as 138 percent for hydrogen and 494 percent for capture and storage carbon
“In total, global investments in renewable energy are on track to outpace oil and gas by 2025,” he said.
“Without the supply chain driving the Inflation Reduction Act credits, America’s low-carbon manufacturing sector will be at a significant disadvantage when competing globally,” he added.
“If the U.S. fails to seize the opportunity, mainland Chinese OEMs will swoop in and take an even larger share of the global offshore wind sector,” Fitzsimmons continued.
US debt ceiling
In a statement posted on its website earlier this month, the White House noted that new analyzes from both the Congressional Budget Office and the US Treasury Department suggest that the US is rapidly approaching the date when the government can no longer pay its bills. “also known as the ‘X date'”.
“History is clear that even approaching a default on the U.S. debt ceiling could cause significant disruptions in financial markets that would damage the economic conditions facing households and businesses,” said the White House in the statement.
“An actual default on the U.S. debt ceiling would likely cause serious damage to the U.S. economy. Analysis by CEA and outside researchers illustrates that if the U.S. government were to default, either with creditors, contractors, or citizens, the economy would quickly change upside down, with the depth of losses depending on how long the default lasted,” he added.
“A prolonged default would likely result in severe damage to the economy, with job growth swinging from its current pace of robust gains to losses in the millions,” he continued.
In a statement posted on his Twitter page last week, US President Joe Biden said: “I just concluded a productive meeting with President McCarthy on the need to avoid default and avoid catastrophe for our economy.”
“We reiterated once again that default is off the table and the only way forward is in good faith towards a bipartisan agreement,” he added.
“While there are areas of disagreement, the President and I, and his chief negotiators, President McHenry and Congressman Graves, and our staff will continue to discuss the way forward,” Biden continued.
I just concluded a productive meeting with President McCarthy on the need to avoid default and prevent a catastrophe for our economy.
We have reiterated once again that default is off the table and the only way forward is in good faith toward a bipartisan agreement.
While…
— President Biden (@POTUS) May 23, 2023
To contact the author, please send an email andreas.exarcheas@rigzone.com
