Lower oil costs buoy chemical companies
October 16, 2006
Worldwide economic strength and lower prices for oil and natural gas helped buoy chemical producers during the third quarter, despite a downturn in the U.S. housing market and a struggling North American auto industry, the Associated Press reports. Performance at such large chemical companies as Dow Chemical Co. and E.I. du Pont de Nemours and Co. is viewed as an indicator of broader economic trends because they make many of the basic materials—such as paint and plastics—used in other products. There is hope easy comparisons to 2005''s hurricane-racked results will mean strong third-quarter results this year. A recent slide in oil and natural gas prices will prove key to those results, since those hydrocarbons serve as feedstocks for chemical companies, as well as energy sources. When it reported second-quarter results, Dow in Midland, Mich., said an $800 million spike in energy and raw material costs cut its earnings and prompted the company to back off a prediction that 2006 earnings would exceed those in 2005. On Sept. 27, Chief Executive Andrew Liveris held to the lowered guidance, saying a few weeks of lower oil prices hasn''t lessened his concern about energy costs.