Energy Inaction = Demand Destruction

By May 29, 2008Energy

From Dow Chemical, a news release, “Dow Responds to Surging Energy Costs.”

MIDLAND, Mich., May 28, 2008 /PRNewswire-FirstCall via COMTEX/ — The Dow Chemical Company [DOW] announced today that on June 1 it will raise the price of all of its products by up to 20 percent – depending on their exposure to rising energy, feedstock and transportation costs – and will review all terms to all customers.

Andrew N. Liveris, Dow chairman and CEO, said the sweeping price increases and reviews are essential as the Company attempts to mitigate the extraordinary rise in energy and related raw material costs.

“Our first quarter feedstock and energy bill leapt a staggering 42 percent year over year, and that trajectory has continued, with the cost of oil and natural gas climbing ever higher,” Liveris said. “The new level of hydrocarbons and energy costs is putting a strain on the entire value chain and is forcing difficult discussions with customers about resetting the value proposition for our products.”

Dow spent $8 billion on energy and hydrocarbon-based feedstock costs in 2002. At the current rate, those costs would climb to $32 billion this year.

“For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America’s manufacturing sector and all consumers of energy. The government’s failure to develop a comprehensive energy policy is causing U.S. industry to lose ground when it comes to global competitiveness, and our own domestic markets are now starting to see demand destruction throughout the U.S.,” Liveris said.

“In addition to these price increases,” Liveris said, “the Company is continuing its aggressive cost-control plan internally and is accelerating its existing top-down competitiveness review for all of its businesses and manufacturing facilities in the light of these new feedstock and energy prices.”

News coverage:

  • USA Today, “Inflation concerns rise as Dow Chemical signals 20% boost,” a story that includes observations from NAM Chief Economist David Huether.
  • Bloomberg, “Dow Raising Prices Most Ever as Energy Costs Surge.”
  • New York Times, Citing Energy Costs, Dow Raises Prices.
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