Everyone in the United States has read about, heard about, or experienced the dramatic increase in oil and natural gas production here in the past several years. State and federal legislators continually discuss the benefits of U.S. energy independence.
As a result, the energy industry has been a driving force in the domestic recovery from the economic downturn resulting from the financial crisis in late 2008. The industry has created good-paying jobs across many walks of life: construction companies to build infrastructure to get equipment into new areas for drilling; dining and lodging can hardly keep up in shale play areas; trucking companies continue to need to move equipment into the areas where drilling is growing; and exploration and production companies are increasing the number of wells being drilled. The creation of these jobs has had a profound positive impact on the recovering U.S. economy.
The energy sector, in turn, benefits from the improvement in the domestic economy. A stronger economy provides the energy business with stronger consumers for energy products. Increased domestic production and job growth drives greater energy consumption.
However, one area of the energy business that has not been aided by the drive for energy independence is the oil country tubular goods (OCTG) industry. This represents a tremendous lost opportunity for our economy. Every well that is drilled requires OCTG pipe products to extract the natural resources (oil, gas, etc.) that we use domestically for energy consumption. Unfortunately, more than 50 percent of these pipe products being used by companies drilling in the United States are manufactured outside the country. More than 3 million tons of foreign OCTG products were imported into the United States in 2013, and that number looks to increase in 2014.
The massive level of imported OCTG products hurts the U.S. economy. Jobs are lost in the domestic pipe manufacturing sector. The damage, however, is much greater than simply adding up the thousands of lost pipe and tube jobs. The 3 million tons (more than $5 billion) of imported pipe made from steel manufactured outside the country is taking jobs from U.S. steel mills. Additional jobs are lost at countless companies in countless industries that support the steel mills and pipe mills. Certainly, some jobs are created in the process of importing pipe, but not nearly as many jobs as created by domestic OCTG manufacturers who utilize steel that is also manufactured in the United States.
I have heard it said that no other country would allow imports to take over 50 percent market share in a product of a critical nature to its economy. I believe this to be true. The U.S. is not like any other countrywe are greater! However, at some point we need to stand up for our economy and our businesses and workers. We are being taken advantage of in the OCTG market by countries that have found a way to circumvent fair trade and our current administration seems to be allowingalmost encouragingit.
In many industries, businesses, workers and consumers request or demand products made in the United States. Unfortunately, this is all too rare in the OCTG business. I applaud those companies that do demand domestic OCTG! Oil and gas companies are posting very good profitsand they should! That said, I encourage these companies to also support the domestic marketplace, by demanding OCTG products made in the United States. Not only will this benefit the domestic steel and pipe businesses and workers, it will increase the viability of their customer base and help grow their businesses. Increased domestic steel utilization will result in increased energy consumption.
Energex Tube is proud to play a small part in helping the United States grow the economy and become energy independent. That said, when you see all the hoopla about the positive effects of energy independence, please remember that we are missing a tremendous opportunity and leaving an entire industry behind by becoming energy independent with foreign pipe.
Randy Boswell is president of Energex Tube, a division of Chicago-based JMC Steel Group Inc.