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Dow Chemical Raises Prices 20%

Written By Brian Hicks

Posted May 28, 2008




Gasoline. Ground beef. A ticket to Chicago. A bowl of cereal. You name it and its price is headed higher.

The reason for this, of course, is quite simple—the commodities that are necessary to bring these and other products to market are skyrocketing.

And while producers have done everything in their power to avoid pricing themselves out of the market, the drum beat of higher prices has now reached the point of no return. It’s either pass on those costs to consumers or take big losses.

That’s the choice faced  by so many businesses today both large and small. Further inflation is the result.

One of them is a giant named Dow Chemical. Dow is hiking its prices 20% across the boards due to escalating energy costs. Needless to say, that is going to put further pricing pressures on practically everything else.

The ultimate culprit according to Dow?  A non-existent energy policy.  

Here’s the skinny.

From Bloomberg by Dale Crofts entitled: Dow to Raise Prices Up to 20% as Energy Costs Surge

"Dow Chemical Co., the largest U.S. chemical maker, will raise prices on all of its products as much as 20 percent because of surging costs for energy, raw materials and transportation.

The increases are needed after a 42 percent jump in first- quarter spending on raw materials and energy, Chief Executive Officer Andrew Liveris said today in a statement. The increases take effect on June 1, Midland, Michigan-based Dow said.

Dow, which makes 3,200 products from Styrofoam insulation to pesticides and plastics, is trying to pass on higher costs amid company forecasts that spending on energy and hydrocarbon-based ingredients will climb to $32 billion this year, a fourfold increase from 2002. The rising costs are symptoms of a “true energy crisis” caused in part by the U.S. government’s lack of a comprehensive policy, Liveris said.

“Dow is probably leading the charge here in being this aggressive, and others are probably going to follow suit,” Tom Uutala, who helps manage $60 billion, including Dow shares, at Victory Capital Management, said in a phone interview from Cleveland. “It’s going to be interesting to see if there’s some demand destruction.”

Liveris said today the U.S. government’s failure to develop a comprehensive energy policy is causing the nation’s chemical industry to lose ground to global competitors.

“The country now faces a true energy crisis, one that is causing serious harm to America’s manufacturing sector and all consumers of energy,” Liveris said in the statement."


Inflation is about to get quite a bit worse. A 20% hike by Dow Chemical is huge.