Cartoon 650: Reality

Many people do not realize the extent to which “hydro carbons” of petroleum are used. It is in plastics, pharmaceuticals, dyes, inks, and even perfume. Therefore, some industries feel the price increases in crude oil more acutely then others.

The chemical industry is a premier American venture. America leads the world. However, its Achilles heel is raw materials. The raw materials come from around the world. In many cases the places are political hot spots. Escalating prices of crude oil changes the financial calculus of the chemical industry. It is not a product for which there are viable substitutes.

The price increases of Dow Chemical will mirror the increases of crude oil. The chemical industry is sending a clear signal high prices for crude are here to stay and the prices will continue to levitate. Even if the government gives the impression the prices are a bubble and eventually will return to lower levels. That and increased exploration for new oil is merely pronouncements for domestic political consumption. The government knows there is only one ultimate direction for the price of oil.