Daniel Yergin, IHS Vice Chairman, welcomed the panelists to the afternoon's plenary on the "New Global Competitiveness" and the role of energy in determining national economic advantage. Andrew Liveris, President, Chairman, and Chief Executive Officer of The Dow Chemical Company and Harald Schwager, Member of the Board of Directors of BASF SE addressed the issue from the perspective of global chemical companies. They described how their investment decisions are heavily shaped by access to feedstock energy resources, electricity prices, and national energy policy. Takayuki Sumita, Japan's Director-General for Oil, Gas and Mineral Resources, offered the perspective of a government attempting to lower energy costs in order to maintain industrial competitiveness. All of the panelists agreed that the unconventional oil and gas revolution in the United States is reshaping the global economy and changing competitive dynamics among nations.

Mr. Liveris noted that national governments are increasingly behaving like companies in their quest to increase their competitive position. However, he stressed that few governments have found the right balance of energy policies to simultaneously pursue social, environmental, and economic goals. Mr. Liveris observed that heavier industries, such as the primary chemical manufacturing in which his company invests, generate more jobs than the service sector, making the attraction and retention of those industries an important goal for governments seeking to combat persistent unemployment. The shale gas revolution, he asserted, is leading Dow Chemical to increase investment in such high-employment activities in the United States.

Mr. Schwager stated that the low-cost shale gas advantage in the United States is shaping investment decisions, including those of BASF. He argued that energy policy in Europe-and Germany in particular-has been moving in the wrong direction. By phasing out nuclear energy while subsidizing renewable energy, Germany has significantly increased electricity costs, while among several of its European neighbors carbon emissions have risen. Mr. Schwager also argued that public fear has led Germany to avoid developing its shale gas resources, although such development could lower costs and provide greater energy security with lower carbon emissions than coal.

Mr. Sumita said power prices in Japan are now three times higher than they are in the United States, inflated by the need to use relatively expensive fuels such as liquefied natural gas and oil to fill the gap left by nuclear plant closures after the Fukushima disaster. In response to these prices, Mr. Sumita observed, the high-energy consumption, high-employment industries are shifting more investment to the United States. He listed several ways in which the Japanese government is attempting to mitigate the impact of higher energy costs, including the expected reopening of 17 nuclear plants, the development of more coal-fired power plants, energy market reforms, and research into new technology. Mr. Sumita emphasized the government's investment in methane hydrates research and development, which he anticipates could be commercially viable in 2025-30.

John Larson, Vice President of IHS, said several recent IHS studies of energy and industrial competitiveness, including one report focused on the United States and one on Germany, supported many of the points made by the other panelists. One prominent example is an IHS estimate that over two million jobs have been created by "the US unconventional revolution." On the other end of the spectrum, IHS calculated that Germany's energy policy has cost the average citizen thousands of euros in disposable income. Mr. Larson urged the audience to consider energy as the "lifeblood" of an economy and, increasingly, a key determinant in industrial competitiveness.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.