Dow CEO calls recent energy price decline a 'dangerous illusion'

Washington (Platts)--30Oct2006

The public and policy makers are deluding themselves into thinking
natural gas prices will remain relatively low, Dow Chemical Chairman and CEO
Andrew Liveris said Monday.

"We seem to have a faith-based energy policy," he said in a speech to the
Detroit Economic Club. "We pray for warm winters and cool summers."

"The problem is now being disguised by the recent decline in
prices...which gives the false and dangerous illusion that the problem is
taking care of itself. But truth be told, it is only good fortune that has
caused the decline," he said.

Liveris said there has been "no great clarion call to conserve energy,
which is the most immediate and effective way to reduce our dependency
on foreign energy. And there are very few tax or monetary incentives to
conserve."

He also said that producing more fossil fuels is not the "ultimate
answer," adding, however, that unless the US can "improve the scale and
efficiency of alternative fuels, we must use fossil fuels wisely, balancing
their economic, security and environmental impact."

Because of the uncertainty created by higher and more volatile gas
prices, he said he could not recommend building new chemical plants in the US,
saying that Dow is instead beginning to invest in places like China
and the Middle East because energy there "is much cheaper, and energy policy
much more coherent and predictable. In short, our company--and our industry--
will continue to grow. There is no question about it. It is simply a question
of where."

Liveris said the US is using more natural gas because the economy is
growing and because "the nation's power plants have been encouraged by the
government to use it as a clean-burning fuel...even though clean-burning
coal and nuclear are often better choices for power generation."

"Exacerbating the problem is the fact that those who supply natural gas
have been largely prohibited by the government from drilling in the most
gas-rich areas, including most of the Outer Continental Shelf, where it is
estimated there is enough natural gas to supply the US for 20
years," he said.

--Rodney White, rodney_white@platts.com

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