Rising Energy Costs Lead to Major Price Hikes

Thanks to the sluggish state of the U.S. economy, many people across the country are becoming increasingly strapped for cash. In recent months, the costs of food, gas and other consumer goods have all been increasing with no relief in sight.
"Consumers hit hard in recent months by sharply higher prices for gasoline and food should prepare to start paying more for various household items following Dow Chemical Co.'s decision to raise its prices by up to 20 percent to offset the soaring cost of energy," according to the Associated Press. "The company, which announced the price increases Wednesday, took the unusual step of directing blame at the nation's energy policy makers."
The price hikes—the largest in the company's 111-year history, according to the Houston Business Journal—will go into effect June 1. The price increases are a necessity for the company as it attempts to mitigate the rising prices of energy and raw materials.
"Dow spent $8 billion on energy and hydrocarbon-based feedstock costs in 2002. At the current rate, those costs would climb to $32 billion this year," according to a written statement released by the company. Dow spent $25 billion on hydrocarbons in 2007, according to Dow Jones Newswires.
“Our first quarter feedstock and energy bill leapt a staggering 42 percent year over year, and that trajectory has continued, with the cost of oil and natural gas climbing ever higher,” Andrew N. Liveris, Dow chairman and CEO, said in the statement. “The new level of hydrocarbons and energy costs is putting a strain on the entire value chain and is forcing difficult discussions with customers about resetting the value proposition for our products.”
Chemical producers such as Midland, Mich.-based Dow and The Woodlands, Texas-based Huntsman Corporation have felt the impact of rising prices from a unique vantage point, because they use hydrocarbons—that is, oil and natural gas—as fuel and as components in their products.
Huntsman announced price increases of up to 25 percent for all of its products Thursday, as well as for an energy surcharge to be imposed on a wide variety of products. The price changes will become effective immediately or else when allowed by contracts.
"The impact of large scale speculation by traders on the price of energy, in addition to the increased costs we are absorbing from our raw material suppliers and service providers, cannot be underestimated," Peter Huntsman, CEO and president, said in a statement. "Having implemented aggressive internal steps to manage these costs, we are now reviewing all Huntsman products and are announcing specific price increases, as well as an energy surcharge to be applied to each product where warranted."
"Already, price increases for certain chemicals products have been dramatic. For instance, the cost of polyethylene—a commodity chemical used in a variety of consumer products, such as plastic shopping bags—has climbed from roughly 30 cents a pound five years ago to about 80 cents a pound now," according to Dow Jones Newswires.
Dow and Huntsman produce chemicals used in numerous industries, from aviation to textiles.