On Wednesday, Dow Chemical Chief Executive Andrew Liveris made a high-profile announcement that Dow would
increase its prices by as much as 20%, starting June 1. Dow, the top
U.S. chemical company, said the plan was necessary to offset the impact
of rising costs for energy and related raw materials. Over the past
year, Dow has already increased its price by about 12%, but
those price changes have been phased in gradually rather than
implemented all at once.
In the interview, Liveris said he thinks the U.S. is underestimating
the level of inflation in the economy and he expects the rise in energy
costs is beginning to destroy demand. Liveris expects the price increases his company made will eventually be passed on to the consumer:
Andrew Liveris on CNBC
"I do think we’ve hit a raw nerve," Liveris said in an interview on
CNBC’s "Squawk Box." "I do think, out there in the world that we all
are living in, I think the consumer is screaming, and I think it’s the
topic du jour, and every company is in a different part of the value
"We’re in a part of the economy that is very elastic," he said. "So unlike electricity, or unlike transportation, which up until now has been relatively inelastic, we’re getting demand-destroyed."
Liveris estimates Dow uses about one percent of the U.S.’s electricity to make its products, which become components of other consumers goods, and the equivalent of about one million barrels of oil a day.
"We’ve done everything at Dow to be cost-efficient, energy-efficient," he continued. "We’ve diversified our mix. We’ve gone overseas for low-cost joint ventures. I think everyone has to bear some of this out-of-control energy policy."
Dow Chemical CEO Says US Underestimating Inflation
CNBC.com | 30 May 2008 | 08:14 AM ET