Tulane energy research calls for downstream focus
By: Jessica Gonzales | New Orleans City Business | 3/25/2014
A new industry-sponsored report from the Tulane Energy Institute comes to a conclusion where there’s already widespread agreement: The future of the energy industry of Louisiana is bright.
It also cautions that previous boom and bust cycles reveal a dynamic and cyclical global market, so it’s imperative that the economic benefits of the energy boom and the manufacturing it has spawned are maximized while Louisiana still has a competitive advantage.
The report, authored by Tulane Energy Institute president Eric Smith and sponsored by Chevron, posits that relying on one technology, industry or energy feedstock such as natural gas is economically risky. Therefore the creation of “downstream value added opportunities” will be the key to extending the energy and manufacturing boom beyond the immediate commodity conversion stage.
Smith’s report notes that going after more consumer-oriented manufacturers that have historically set up shop in states along the Atlantic seaboard could be crucial to unlocking more high-wage manufacturing jobs for Louisiana’s future.
“Rather than manufacturing polymer chips and shipping them east in rail cars, we could be producing the products that are being consumed by the ultimate consumers … The closer you get to the consumer, the lower the fixed capital cost of the plants and the more people intensive the production becomes,” Smith writes. “In the quest for more high paying jobs, we cannot afford to overlook this option.”
Another key component to the longevity of the energy boom is adequate transportation infrastructure, according to the report. Smith notes that as manufacturing and refinery production increase, adequate transportation to serve the projected demand is of upmost importance.
“Louisiana must coordinate activities in the downstream market and ensure transportation infrastructure is prepared for added volume of material going through the Port of New Orleans,” Smith noted in a release accompanying the report.
Smith’s research and analysis also contained data on the energy and manufacturing labor force that illustrates why Louisiana needs to keep growing its workforce.
The report notes that energy sector wages in 2011 were 97 percent higher than pay in the private sector. Within that category, oil and gas extraction employees were the highest compensated — $2,282 per week or 180 percent higher than the average private sector employee.
The lowest wage rate within the energy sector was among plastics and rubber manufacturing workers. They took home an average of $970 per week, 18.9 percent higher than the average private employee.
The report states that out of the 1.5 million privately employed workers in the state in 2011, energy workers represented 6.9 percent but earned 13.6 percent of the wages paid.
Read the full article here: http://neworleanscitybusiness.com/blog/2014/03/25/tulane-energy-research-calls-for-downstream-focus/#ixzz2yyJxF8Hl