Dow: U.S. in Natural Gas Crisis

A Dow Chemical executive told Congress yesterday that Hurricanes Katrina and Rita illustrate that the nation’s tight natural gas supply-and-demand balance continues to contribute to extremely high and volatile prices and poses a significant threat to the global competitiveness of the U.S. chemical industry.

While the disruption caused by the hurricanes will be short-term, “a far greater threat to the U.S. chemical industry and the entire manufacturing sector is the serious vulnerability of the nation’s energy supply,” Andrew N. Liveris, chief executive officer of Dow, told the Senate Energy & Natural Resources Committee. “The U.S. is in a natural gas crisis. The hurricanes have dramatically underscored this problem, but they did not cause it.”

Liveris added that Dow and other U.S. chemical manufacturers have been forced to take aggressive action to mitigate the impact of high and volatile energy and feedstock costs, including implementing cost-cutting measures, focusing on energy efficiency and conservation, shutting down some inefficient plants in North America, and investing in regions of the world such as China and the Middle East, where natural gas is more affordable.

Liveris noted that the domestic price of natural gas, which was approximately $2.00 per million Btu six years ago, exceeded $6.00 in February of this year, increased to $10 in the days just prior to Hurricane Katrina, and then jumped to $12 immediately after the hurricane struck the Gulf Coast.

“The price of natural gas is now $14, which is the equivalent of $7.00 per gallon for the gas we put in our cars,” Liveris said. “This renders the U.S. chemical industry—which uses natural gas as both a fuel and a raw material—simply uncompetitive with the rest of the world.”