Resurgence of U.S. manufacturing could increase domestic oil demand


An increase in domestic manufacturing activity could drive up the price of oil. To capitalize on this, producers may want to implement new oil production equipment.

For years, many believed the idea of an American manufacturing renaissance was a pipe dream. However, there is mounting evidence that companies are getting serious about "re-shoring" their production activities.

Last year Apple, which has long faced criticism over conditions in the Chinese factories where its products are produced, announced that it would start building some of its popular Mac computers in the United States. Other companies have made similar announcements in recent years.

Retailers are also becoming more proactive in this area as a result of growing consumer demand for American-made goods. Earlier this year Wal-Mart, the world's largest retailer, announced that it would spend an additional $50 billion over the course of the next decade to source products from U.S.-based factories. The company said it would focus on "high-potential areas like textiles, furniture and higher-end appliances."

Adding to the evidence that this is a substantial trend was a survey conducted at the Institute for Supply Management's (ISM) 98th Annual International Supply Management Conference in Dallas. More than 500 supply chain professionals responded to a question regarding "re-shoring," with almost 30 percent saying that their organizations are "likely" or "very likely" to increase the amount of material that they source from domestic facilities.

Thomas Derry, chief executive of ISM, said the survey results indicate that companies are increasingly aware of the downside of sourcing from far-flung countries and interested in the stability provided by American manufacturers.

"The move to re-shoring is largely resulting from the risks that companies were exposed to in Japan and Thailand from natural disasters," Derry said. "Combine this with increasing freight rates and increased levels of inventory, companies are re-evaluating the approach. Many want to have inventory close to the point of manufacture – even if it means duplicating resources to do it."

Oil and gas producers may need new equipment to meet demand

If this trend continues and the nation's manufacturing sector is able to stage a significant comeback, it could lead to an increase in domestic demand for fuel and electricity, which will put pressure on oil and gas producers to come up with the necessary resources.

Implementing new oil production equipment could prove to be critical in allowing energy companies to meet rising demand and capitalize on any uptick in economic activity. The hydraulic jet pump can be a particularly valuable addition, as it can be used to quickly complete drill stem testing and initiate pumping operations at new sites or boost recovery rates at established wells.

The jet pump is valued by producers because of its high level of versatility. The unit's intuitive design allows it to be easily removed or adjusted within vertical or horizontal wells. Retrieval for maintenance or optimization is performed through the manipulation of surface valves and reverse circulation of fluid, which means that no work over or wire line unit is required for servicing.

Jet pumps can even be deployed at sites where problems with the well casing would limit the effectiveness of other artificial lift solutions. And the lack of downhole moving parts means that the equipment is durable and simple to operate.