- The Washington Times - Thursday, May 29, 2008

Better start stocking up on diapers and detergent.

Consumers hit hard in recent months by sharply higher prices for gasoline and food should prepare to start paying more for various household items in the wake of Dow Chemical Co.’s decision to raise its prices by up to 20 percent to offset the soaring cost of energy.

The company, which announced the price increases yesterday, took the unusual step of directing blame at the nation’s policy-makers.

“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,” said Andrew Liveris, Dow Chemical’s chairman and chief executive officer.

Dow Chemical’s spiraling costs are “forcing difficult discussions with customers,” he said.

The Midland, Mich., company supplies a broad swath of industries, from agriculture to health care, and any sizable price jumps would likely affect almost all of them.

The price increases will take effect Sunday and will be based on a product’s exposure to rising costs. Dow Chemical said it spent $8 billion on energy and hydrocarbon-based raw materials back in 2002, and that could climb fourfold to $32 billion this year.

Dow Chemical makes everything from the propylene glycols used in antifreeze, coolants, solvents, cosmetics and pharmaceuticals, to acrylic acid-based products used in detergents, wastewater-treatment and disposable diapers.

It makes key ingredients used in paints, textiles, glass, packaging and cars.

The company, whose products are sold in 160 countries, last month reported a 3 percent drop in quarterly earnings amid a 42 percent jump in energy and raw materials costs.

Crude oil prices surpassed $135 a barrel last week, more than double the price from a year ago. Rising energy and transportation costs have been blamed for higher food prices, which rose 5 percent last year, the biggest gain in 17 years.

Kevin McCarthy, a Banc of America Securities analyst, said in a note to investors there is “a growing unwillingness among chemical producers to function as an energy shock absorber.”

“To be sure, cost inflation is not new; it has been an ongoing battle for Dow and others in recent years,” he wrote. “However, we are seeing a new sense of urgency at Dow, and its competitors, to pass along escalating and volatile costs in an environment of decelerating demand.”

Competitor Rohm and Haas Co. announced April 29 that, beginning this month, it will apply an indexed raw materials and energy surcharge to products made by its “specialty materials” businesses. The index will be adjusted up or down monthly, based on the collective changes in key raw material, crude oil and natural gas costs, according to the Philadelphia company’s Web site.

On Friday, Kimberly-Clark Corp. announced that it will raise prices 6 percent to 8 percent beginning in late July for Huggies diapers, Pull-Ups training pants, and Cottonelle and Scott bathroom tissue.

Procter & Gamble Co., the Cincinnati consumer products maker, said last month that more price increases were coming this summer.

The American Chemistry Council spent $770,000 in the first quarter of this year lobbying lawmakers on climate change, energy-policy reform and other issues. The council wants new supplies of natural gas - which is used extensively by its members to heat and power their facilities and as a raw material for thousands of products - brought to market by opening access to supplies that are currently off-limits.

The trade group represents more than 130 companies, including Dow Chemical, and spent about $2.4 million lobbying last year.

Dow Chemical itself spent $540,000 lobbying in the first quarter and more than $3.4 million last year on various pieces of legislation, including energy efficiency and climate-change bills.

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