Welcome to Saudi Albany?
The people who run U.S. Steel have not had much reason to celebrate in a long time. Once the icon of American manufacturing, the company became shorthand for the country’s industrial decline. For decades, it ignored innovation and was undercut by cheaper Asian producers and outflanked by U.S. start-ups. Its brief glory in the mid-2000s turned out to be fueled by housing-bubble excess; and its stock price has dropped nearly 90 percent since late 2008. A few months ago, John P. Surma, the company’s chairman and C.E.O., addressed a Steel Hall of Fame event at which all the inductees were either long dead or retired. He noted that, given the business climate, his own generation of steel C.E.O.’s might have trouble getting the big prize themselves.
Deep thoughts this week:
1. Love it or hate it, fracking will redefine the U.S. economy.
2. Yes, there are serious environmental issues to address.
3. But the worst hazards may be political.
4. And even economic.
Fortunately, Surma went on, this misery is about to change. The American steel industry recently received the economic equivalent of a gift from the heavens: natural gas extracted by means of hydraulic fracturing, or fracking. Fracking involves a whole lot of long steel pipes being sunk into rock formations thousands of feet beneath the ground in search of hydrocarbons. U.S. Steel, which is based in Pittsburgh, also happens to be right on top of the Marcellus Shale, the oil-rich formation that stretches from New York to Ohio. No one knows exactly how much gas is down there, but modest estimates suggest it’s at least 100 trillion cubic feet. Given this bounty, U.S. Steel recently spent $100 million on a facility whose entire purpose is to make “tubular product” for gas companies.
For Surma, an even bigger gift should come over the next few decades. The switch from coal to cheaper natural gas will save U.S. Steel hundreds of millions of dollars a year. These savings will be amplified by the fact that the company’s competitors in Europe and Asia will need to pay much more. In fact, many economists say that fracking will soon fundamentally shift global economic logic to uniquely benefit the United States. Ed Morse, an influential energy analyst at Citigroup, argues that the natural-gas industry will bring around three million new jobs to the United States by the end of this decade. He also expects that fracking will add up to 3 percent to our G.D.P. and trillions in additional tax revenue. Along the way, it will turn around perennial stragglers, like steel and manufacturing. For millions of workers, there could not be any better news.