February 2, 2001

"Manufacturers consume more than a quarter of the energy used in our economy, which means they’re being hard-hit by escalating natural gas prices," NAM President Jerry Jasinowski said at a Jan. 17 news conference in Washington, D.C. "Two-thirds of the survey respondents say they rely on natural gas as a significant source of energy. According to the Department of Energy, the price of natural gas in the first quarter of 2001 will be 139 percent higher than during the same period one year ago. Manufacturers consume 26 percent of the natural gas used in the U.S., so they face serious economic consequences from the extraordinary rise in prices.

"Our calculations indicate that between 1999 and 2000, the rising price of oil and gas cost our economy more than $115 billion, a full percentage point of GDP. Simply put, over the past year manufacturers that use natural gas have been hit by a whopping increase in energy costs that have reduced their profits by roughly 14 percent.

"The survey shows that nine out of ten companies dependent on natural gas are passing no more than a quarter of their increased energy expenses through to those who buy their goods. Additionally, more than a quarter of large companies report that they have curtailed operations in response to natural gas price increases or unavailability, and 12 percent of all natural gas-using firms have had their production processes interrupted due to the inability to obtain natural gas," Jasinowski said.

Jasinowski also highlighted the fact that while three out of four natural gas-dependent companies expect prices to drop in the spring of 2001, 86 percent say they don’t think prices will fall to a level comparable to the spring of 2000.

"Unless supplies of natural gas increase, economic growth will continue to be dampened. The survey indicates that about six percent of firms have laid off employees in response to higher natural gas costs and ten percent of those surveyed said they expect to lay off workers in the near future due to natural gas prices," Jasinowski observed.

"This survey also indicates that employees are already feeling the impact of higher energy prices as 68 percent of firms say they have reduced profit sharing, 36 percent have reduced hours worked and employee income earned and 29 percent have reduced benefits," Jasinowski continued.

"The NAM survey includes responses from some of America’s largest corporations to hundreds of small and mid-sized manufacturers, which underscores why the Bush Administration and Congress must work together to craft a package of business tax reductions to help arrest the short-term affects of rising natural gas costs. For the longer term, the Administration and Congress should develop a strategic national energy plan to increase our energy supply, improve our energy efficiency and optimize all energy resources, including natural gas, oil and coal.

"Unless the Administration and Congress act soon, we’ll begin to see additional layoffs in the manufacturing sector, higher prices for consumer goods and slower economic growth. Given the sudden sharpness of the downturn, lawmakers must quickly enact effective short- and long-term remedies to our energy problems in coming weeks," Jasinowski concluded.

The survey, which was conducted during the week of Jan. 8-12, had a response rate of 13 percent (737 respondents).


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