In 2000, U.S. manufacturing output began a protracted decline, continuing until the end of 2001. Total industrial production fell by about six percentage points in two years, with certain sectors, such as basic chemicals and iron and steel, being hit particularly hard. Electricity sales to manufacturers fell by even more—and those sales have yet to return to the level reached in 2000.
Like so many downturns, a significant contributor to this one was an energy price shock. Oil prices, which had fallen to almost $10 per barrel by 1999, more than tripled by late summer 2000. At the beginning of 2000, domestic daily spot prices for natural gas were around $2 per million British thermal units (mmBtu); by year’s end, they were nearly $10 per mmBtu. The surge signaled a long-term change: Both the level and volatility of gas prices would rise significantly, with spikes becoming much longer and more common.