Shale Gas May Reinvigorate Domestic Chemical, Plastic Industries

June 2012 Vol. 239 No. 6

Analysts with Great American Group LLC, a provider of asset disposition, valuation and appraisal services, believe that falling natural gas prices may have a significant impact on the domestic petrochemical industry in 2012 and beyond.

Over the past nine months, natural gas prices have fallen precipitously. Data from the Energy Information Administration indicates that prices peaked close to $4.60 per million Btus in June 2011, but have since fallen to the $2 range.

“Shale gas has the potential to change the face of the domestic market. It will move focus away from high-cost petroleum processing and toward low-cost gas processing,” said Jonathan Deptula, Great American Group project manager and chemicals/plastics industry specialist. “The cost differential is significant enough that the U.S. may even begin to experience increased export demand.”

Great American Group expects market prices for chemicals and plastics to be somewhat volatile in the coming year, driven by petroleum costs that have skyrocketed over the past three months and natural gas prices that have plummeted. Manufacturers will likely continue to migrate toward the low-cost option, which may impact the types of feedstocks and plastics that are manufactured.