US chemical leaders caution Obama on stimulus plan

05 January 2009 22:30  [Source: ICIS news]

WASHINGTON (ICIS news)--US chemical industry leaders on Monday welcomed plans by President-elect Barack Obama to stimulate the nation’s economy with a $700bn (€504bn) spending package but warned against creating artificial demand.

Charlie Drevna, president of the National Petrochemical & Refiners Association (NPRA), cautioned that a new economic stimulus package should not favour some industries over others.

“A piecemeal, politically expedient approach that rewards some industries over others, creating artificial demand along the way, is not the solution to long-term economic success,” Drevna warned.

Government-mandated efforts to stimulate one industry or production sector over others do not work, he said.

“With ethanol, for example, we’ve seen that decades of government subsidy and artificial markets have not been able to sustain the [biofuels] industry, with some of its companies even entering bankruptcy,” Drevna said.

US federal policies have for years included 50 cents per gallon or more incentive for refiners’ use of corn-based ethanol as a gasoline oxygenate. Federal law also mandates minimum annual consumption of biofuels.

Domestic US biobased ethanol production also is protected by a tariff against bio-ethanol imports.

“It’s time for a long-term strategy that relies on the strength of the free markets and caters to real supply and demand,” Drevna added.

A new federal stimulus package, said Drevna, “should create an environment that is fair to all domestic industries and doesn’t rob Peter to pay for Paul’s shortcomings”.

Earlier on Monday, a leading US business group welcomed Obama's reported plan to include major tax cuts in his stimulus package.

Cal Dooley, president of the American Chemistry Council (ACC), suggested that a federal stimulus package that invests in energy efficiencies and renewable energy programmes would help create demand for high-value materials produced by the chemicals industry.

In a letter to Obama, Dooley noted that the two principal consuming sectors for chemicals, building construction and auto manufacturing, “are nearly at a standstill”.

“Now other important markets, including consumer products, packaging and exports also are in rapid retreat,” Dooley said.

He noted that provisions in recent federal energy bills that would improve energy efficiencies in public buildings and residential and industrial energy use have yet to be funded.  Directing new stimulus funds to those already authorised federal programmes, he said, would help create jobs.

He also urged Congress to encourage more production of plastic and composite intensive vehicles (PCIVs) to lower vehicle weights and thereby reduce fuel consumption and pollution.

Obama and the new 111th US Congress are expected to work out a new federal economic stimulus bill by mid-February, a measure that some on Capitol Hill suggest may reach $1,000bn.

($1 = €0.72)

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By: Joe Kamalick
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