Dow Chemical has already announced that it raising prices due to the increase in energy and feedstock costs encountered this year.  In order to ensure future access to feedstock Dow has also entered into new ventures with several companies in the Middle East.

Energy and feedstock costs jumped from $8 billion in 2002 to $32 billion this year necessitating the 20% increase imposed by Dow on June 1st.  A four fold increase in six years is more than any company can handle with out inevitably raising costs on the back  end for consumers.

Dow Chemical’s feedstock is the byproduct of oil and gas production that is then converted in to new products for industry and consumers.  Dow products are used to provide everything from fresh water, food, and pharmaceuticals to paint.

With $54 billion  in annual sales, Dow is not a small company but has to respond to market pressures like everyone else.  With investments and joint ventures worldwide, Dow is using its expertise and knowledge to create connections that it hopes will create sustainability.

As part of Dow’s strategy, it has entered into joint ventures in the Middle East with Saudi Aramco, Petrochemical Industries Corporation, Libya’s National Oil company, and Oman Oil Company.  Part of Dow’s strategy is to collaborate in the construction of more oil refineries and through that process, access to more oil byproducts.

By creating partnerships with these companies located near the largest source of oil, Dow Chemical will be in a strategic place to ensure its access to oil and oil byproducts when oil starts getting scarce.  These partnerships are being negotiated for only the next 20 to 30 years.  If oil becomes scarce at the end of that time, Dow will not be obligated with any further investment responsibilities. 

This raises the question:  does Dow know something about oil capacity predictions that we don’t?  Is 20 to 30 years the expected life span of the remaining oil reserves in the Middle East?

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Entry was posted on Monday, June 23rd, 2008 at 9:05 pm under Science and technology.

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