We All Pay for Congress Incompetence
This is not a Democrat or Republican issue. Both have held either the White house or Congress over the last three decades and neither has done anything. Now, we'll pay....
Today, after announcing a 20% price increases Dow Chemical's (DOW) CEO Andrew Liveris sai, "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."
Although Government inflation numbers have remained relatively flat, chiefly because producers were not passing along prices increase, we are now seeing the end that phenomena. The are not too many products we consume today that do not contain a product DOW produces. That being said, producers now have the following option, decrease profits or increase prices. Guess what they will choose.
There is another, more unpleasant option. Move. Liveris started this at Dow three years ago and it is the reason they have been able to hold earnings constant despite 42% cost increases. In 2002 feedstock costs for Dow were $8 billion. This year that number is expected to hit $32 billion.
Natural gas has almost tripled and oil has doubled in that time frame. We are going to see an exodus of manufacturing out of the US to nations that offer cheaper input prices. We saw this in the labor markets in the 1990's and the exodus that may begin to happen now will be widespread.
Liveris gave a heads up into what is next...."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." Translation? More US job losses
Liveris saw current events happening three years ago and has railed against Congress during that time frame for a national energy policy. Congress rather than acting has done nothing.
Now, we'll all pay...
Disclosure ("none" means no position):Long DOW
The above story is the opinion of the author only and it does not reflect
iStockAnalyst opinion. Further, the author is not personally advising you
regarding the suitability of the story for your investment needs. In no event
iStockAnalyst will be liable for any loss or damage including without
limitation, indirect or consequential loss or damage, or any loss or damage
whatsoever arising from or arising out of, or in connection with the use of this
information. Please consult your investment advisor before making any investment
decision.
