Low oil prices to boost global GDP, benefit Dow − executives

HOUSTON (ICIS)–US-based Dow Chemical expects to benefit from lower oil prices, based on the assumption that it will allow consumers to spend more money on items other than fuel, increasing demand for the company’s products, executives said on Wednesday.

Dow expects the world’s economy will grow by at least 3.4% in 2015, up from 2.8% this year, said Howard Ungerleider, chief financial officer. He made his comments during an earnings conference call.

“Low oil prices mean more demand,” said CEO Andrew Liveris.

Because of GDP growth, Ungerleider said ethylene operating rates should continue rising.

Higher operating rates are generally good for companies because they reduce expenses.

Ethylene operating rates were 88% at the end of this year, and they should reach 90% in 2015, he said.

Ungerleider expects this trend of 1%/year growth to continue.

The low oil prices should also benefit the company’s crackers in Europe, which are capable of using naphtha and propane.

However, the low prices should cause some temporary margin compression for the company’s ethane crackers − although ethane will maintain its cost advantage.

The more likely effect of low oil prices could be on liquefied natural gas (LNG) projects and on ethane-export terminals, Liveris said.

Oil prices have fallen sharply since June, when Brent was $115/bbl. On Tuesday, it closed at $86.22/bbl, a drop of 25%.

Ultimately, Liveris said oil prices will recover because of higher demand.