Crude oil price surge helps U.S. chemical makers

Plastics Mar 12, 2011 No Comments

Chemical prices are set globally by naphtha-based producers. That lets Dow and its peers charge the higher industry price and bank the margins from using cheap natural gas.

Cheap natural gas is giving U.S. chemical companies an edge over European rivals, many of which are increasingly anxious about soaring crude oil prices resulting from uprisings in the Middle East.

That edge should lift 2011 margins and earnings at Dow Chemical Co., Westlake Chemical Corp., LyondellBasell Industries NV and other American-based commodity chemical producers.

Large-scale exploitation of shale formations in the United States has driven down natural gas prices by 12 percent in the past year, highlighting the growing disconnect between the costs of crude oil and natural gas.

Both natural gas and crude are used to make ethylene, propylene and other basic chemicals. They in turn are used to produce swimming pool liners, pantyhose, diapers and other common products.

Brent crude prices have jumped 46 percent in the same time period—and 17 percent in the last month alone—as democratic revolts have rippled across the Middle East, causing supply concerns among Europe’s chemical leaders, including Lanxess AG and BASF AG.

via Crude oil price surge helps U.S. chemical makers.

Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.