Carpe Diem

Big chemical companies like Dow enjoy globalization and export markets, but want to limit nat gas exports?

Rank Top 10 US Exports, 2012 Millions
1 Automotive vehicles, parts, and engines $145,992
2 Fuel oil and Petroleum Products $117,134
3 Chemicals $83,528
4 Pharmaceutical preparations $47,913
5 Industrial machines, other $46,128
6 Civilian aircraft $45,267
7 Semiconductors $42,087
8 Telecommunications equipment $38,282
9 Electric apparatus $38,171
10 Nonmonetary gold $36,308

As a US-based corporation, Dow Chemical benefits significantly from international trade and globalization. In 2011, more than two-thirds of the company’s $60 billion in global sales were in foreign markets, and roughly half of its assets and employees were outside the US. The US chemical industry’s exports last year of $83.5 billion ranked as America’s third largest export category, as Dow and other US chemical companies took advantage of global demand for their products (see table above).  The second largest export category in 2012 was America’s petroleum-based products like jet fuel, kerosene and heating oil, which were exported at record-high levels last year, thanks to America’s new energy abundance of shale resources.

With booming export markets for America’s chemical and energy products, and with Dow Chemical being a shining example of an American company reaping significant benefits from export markets and globalization, you would think that Dow would naturally support other American companies that could likewise benefit from exports markets and global trade. Or even if it didn’t publicly support other companies taking advantage of export markets, you wouldn’t think that Dow would publicly oppose the attempts by other companies to have access to the same foreign markets that Dow enjoys, would you? Well, think again.

As the WSJ points out today, companies like Dow claim to “love American exports” but are selfishly engaged in rent-seeking because they now “hate certain American exports,” like America’s abundant natural gas, when those exports might affect Dow and their allies’ bottom lines, here’s an excerpt:

Everyone loves American exports, or at least claims to, so it’s worth highlighting the big business lobbying underway to limit the export of U.S. natural gas. Couched in the usual language about “energy security” and domestic jobs, the effort is as pure a special-interest play as you’ll find.

The lobbying goes under the flag of America’s Energy Advantage (MP: Or more accurately America’s Energy Advantage for Some Big Chemical, Steel and Aluminum Companies Using Other Companies’ Natural Gas), which is led by Dow Chemical, with an assist from the likes of steel and aluminum producers. Now that America’s shale-gas boom has reduced the domestic price of natural gas—which manufacturers use as a feedstock and to power their plants—these companies want the Obama Administration to limit or block exports of liquefied natural gas.

Specifically, they want the White House to limit the number of LNG export terminals. The U.S. currently exports no LNG, although 16 proposed facilities are seeking Department of Energy approval. A December report commissioned by the Energy Department found that exports would provide net economic benefits in more jobs, tax revenue and investment.

Dow Vice President George Blitz tells us the company is “pro-free-trade” and is simply looking for the “sweet spot” in the export market. He means sweet for Dow but sour for everyone else. Dow recently withdrew in a huff from the National Association of Manufacturers because NAM to its credit continues to support gas exports. The American Chemistry Council is also sticking to its free-trade principles on exports.

The last thing American business needs is politicians deciding when and where companies can sell their goods. U.S. gas supplies are vast, and production was increasing so rapidly a year ago that prices fell to $2 due in large part to an unusually warm winter. If demand for U.S. LNG takes off, natural gas prices will rise, which will lead to more production.

The plea from Dow and friends for government limits on exports is short-sighted—and embarrassing.

MP: The US is already exporting chemicals and petroleum products at record levels.  For Dow and other companies to suddenly and selectively object to exports of natural gas seems disingenuous and embarrassing, as the WSJ points out. Dow and its allies apparently don’t want limits on chemical exports, and aren’t calling for limits on hydrocarbon fuels like fuel oil and the other petroleum products that are selling overseas at record levels. To selectively call for limits ONLY on exports of natural gas clearly exposes Dow, Nucor and Alcoa as self-interested rent-seekers deserving of a gold medal. It’s truly shameful that companies like Dow are now wastefully spending resources to make the case that they are somehow entitled to the abundant natural resources that other US companies extracted from miles below the ground, that they didn’t invest a penny of their own capital to produce, and that they didn’t employ a single worker to develop.

35 thoughts on “Big chemical companies like Dow enjoy globalization and export markets, but want to limit nat gas exports?

  1. “…they are somehow entitled to the abundant natural resources that other US companies extracted from miles below the ground, that they didn’t invest a penny of their own capital to produce, and that they didn’t employ a single worker to develop.”

    This would be a great time for Dow and others to invest in domestic natural gas producers and quit whining.

  2. [Just shooting from memory again, so you know what that brings.] But if you totaled all agricultural products for exports, I think it would have been in the Top 10.

  3. For Dow and other companies to suddenly and selectively object to exports of natural gas seems disingenuous and embarrassing, as the WSJ points out“…

    Hmmm, is there a possibility that Dow and those other companies just might know something we and the WSJ don’t know?

    I mean why would they want to turn down a chance to make money today?

  4. There is no mystery about their attitude at all. The availability, and therefor the price of natural gas, directly impact their production costs for every product they make.

    I’m going to be very self-centered here and say that I want gas exports limited as well. It not only helps hold my own winter heating costs down, but is a huge factor in keeping the prices of many other domestically produced products down as well. THAT improves our competitive position overall on the world’s markets.

    • rob-

      and when your boss/customers decide to be self centered as well and attempt to legislate that your wages/prices be cut in half to enhance their/our national competitiveness, how will you feel then?

      • and when your boss/customers decide to be self centered as well and attempt to legislate that your wages/prices be cut in half to enhance their/our national competitiveness, how will you feel then?“…

        Isn’t that where Free to Choose comes from?

    • Rob B.

      That’s fine as long as you’re aware that current low gas prices can only be temporary. Current excess supply and resulting low prices discourage development and drive marginal producers out of business, and eventually lower supplies will cause prices to rise once again.

      On the other hand, the increased demand from LNG buyers would raise prices, encourage production, and increase supplies until prices decreased once again.

      The price of gas or any other resource will always work, when allowed to do so without government interference, to equalize supply and demand. Competition ensures that that price is as low as possible.

      THAT improves our competitive position overall on the world’s markets.

      No it doesn’t. “competitive position on the worlds markets” is a political phrase used to attract votes, and has no basis in economics. Exchange isn’t zero sum with one party gaining at another’s expense. A voluntary exchange is always mutually beneficial for both parties or it wouldn’t happen.

      It’s in everyone’s interest as consumers to pay the lowest possible price for what we want, no matter where it’s made. This leaves us with more of our income to spend on something else, making us richer, and making the counterparties in our exchanges richer.

      All businesses compete with others both foreign and domestic. There is no “our” companies and “their” companies.

    • But the natural gas doesn’t belong to you, it belongs to the companies that extracted it from miles below the ground. This is a matter of property rights, ethics and morality. You might like lower natural gas prices, but the gas doesn’t belong to you, and you’re not entitled to the resources and property of others. It’s unethical and immoral if you think you’re somehow entitled to the cheap natural gas that others invested millions of dollars to extract from shale rock miles below the ground…..

      Protectionist thinking is always based on a limited analysis of how export/import restrictions benefit one group, while ignoring the benefits to other groups, and to the net benefits that always results from open/free trade.

  5. So, corporate greed does exist. What is so surprising about a company legally trying to maximize profits for their shareholders? Often the invisible hand finds a way into your pocket.

    • It’s not surprising, and public choice economics explains in detail why self-interested corporate behavior is expected when special interest groups can influence the political process in their favor by expending resources for rent-seeking/lobbying. So it’s expected, but at the same time it’s immoral, shameful, disgusting, and embarrassing, and companies like Dow should be called out for their disgraceful and unethical tactics.

      There’s a difference between free market capitalism and crony capitalism/parasitism, and Dow is engaging in the latter….

      • Was it ever otherwise with respect to self interested companies. I will give an example from the past. The Central Pacific got the start of the Sierra Nevada moved the limit of the sierra nevada closer to Sacramento to get more subsidies in 1864. So companies have been doing this as long as there have been joint stock companies. Another example the East India Company needed a bail out and the British government did so by arranging to give the company an exclusive license to sell tea in the colonies thus the American Revolution was started (one of the causes, not the whole cause).
        So it is nothing new, and we somehow expect human nature to change.

        • Dow is a multinational company working with laws and competitors in other countries who are using any laws they can find or enact to put each other out of business. How Dow acts in the U.S. might be driven more by how their competitors in India or elsewhere acts than whether we feel what they are doing is immoral, shameful, disgusting or embarrassing.

          • As Steven Landsburg wrote in his book “Fair Play”:

            “What parent could accept an excuse [from his or her child] like, ‘Sure, I stole the cookies, but I know another kid who stole a bicycle.’?”

            As adults, we therefore shouldn’t accept Dow’s flimsy excuse that “Sure we’re engaged in shameless, unethical, immoral rent-seeking in the US that will lower the standard of living of Americans on net, but hey, the rent-seeking is even worse in India, Russia and China.”

          • I don’t agree with what Dow is doing at all, but I understand it. Dow is operating legally and logically without emotions, and it is heartless, too. Shame on them, and we should expose them as you say! I expect big corporations to try to make laws in their favor and find technicalities to go around existing laws, it’s in their DNA, and that’s why I am a union supporter. I’ve spent a lot of time in should or shall arguments. I think a better analogy for the kid stealing cookies is a kid wanting to play video games instead of doing his homework because his friends do. Stealing cookies and bicycles are illegal activities.

          • Walt

            I expect big corporations to try to make laws in their favor and find technicalities to go around existing laws, it’s in their DNA, and that’s why I am a union supporter.

            Perhaps you could elaborate a bit on that. I don’t see how union support follows logically from a dislike of corporate cronyism.

            In this specific case do unions favor nat gas exports as a counterweight to Dow’s rent seeking efforts?

            While I agree that we should expect corporate efforts to be self serving, as it is the fiduciary duty of corporate officers to to maximize returns to the owners, I still believe, perhaps naively, that it is the fiduciary duty of elected officials to represent the interests of those who elected them, and to honor their oath of office which includes upholding the Constitution of the US, that grants no authority to favor some interests over others.

            Even the much abused “general welfare” clause contains the word “general”, and would seem to preclude acting for anyone’s “special welfare”.

            Yes, I understand that’s not how it’s working in reality, but maybe we should be holding those clowns more accountable, rather than complaining about the actions of businesses.

          • “Perhaps you could elaborate a bit on that. I don’t see how union support follows logically from a dislike of corporate cronyism.”

            Corporations look for legal edges over their competitors even if it means they are a bit shifty (that’s even more true now with multinationals and differing laws in other countries). The corporations that find the most edge survive, and the rest fail. Shareholders are at the mercy of having a CEO that knows just how far he or she can push the envelope of legality and decency. Short of the legal system, corporations are held accountable ethically and morally externally by transparency like Dow was here (and by Michael Moore) and internally by labor unions. You would be surprised how many calls for union committeemen are initiated for employees by sympathetic management who agree their employee is morally and ethically right but they can’t do anything because no written rules were actually broken. You have to use alternative options to solve problems when you don’t have definitive written language on your side. Those alternative options are not available to individual employees because they don’t have any power other than quitting their job.

          • “In this specific case do unions favor nat gas exports as a counterweight to Dow’s rent seeking efforts?”

            I don’t know about this specific case. Unions typically use the political system to try to benefit the people who pay them money to do so as most organized groups do.

        • lyle-

          so?

          saying “hey, there have always been slaves” or “but women have never had the right to vote” does not justify it.

          would you accept “but people have been beating their wives since time out of mind” as a defense in a domestic violence case?

          who care if companies have always done this? that does not make it any less shameful, unethical, and harmful to economic progress.

          to argue otherwise is just an appeal to practice fallacy.

          • morganovich, if you discuss slavery using positive economics instead of normative economics you can accept slavery as wrong while still understanding it was the labor framework plantations legally used at one time and an important part of U.S. history. The usual recourse for shameful and unethical behaviors in a civilized society are laws.

          • “morganovich, if you discuss slavery using positive economics instead of normative economics you can accept slavery as wrong while still understanding it was the labor framework plantations legally used at one time and an important part of U.S. history. The usual recourse for shameful and unethical behaviors in a civilized society are laws.”

            and what does that demonstrate walt? clearly legal is not the same as ethical. i think we all agree on that. but good law ought to aspire to ethics.

            i can see no rationale for the law dow proposes. it’s hypocritical, unethical, counter to notions of liberty and rights, and economically damaging.

            the “positive” economics argument you are describing basically boils down to “might makes right” which seems like a poor rationale for making choices.

            sure, it can wind up working, but surely we should not aspire to such nor point to it as an exemplar of how to make policy.

        • Stealing cookies and bicycles are illegal activities.

          Not if you can get “big brother” to sanction theft for you.

          Imagine a kid is selling lemonade to you for $1/glass. some other kids approach with offers to buy lemonade for $1.50.glass so you ask your neighborhood thug to keep them away so you can continue to get lemonade at $1/glass.

          Are you stealing from the lemonade seller by denying them the ability to sell to others who offer more?

        • Corporations look for legal edges over their competitors even if it means they are a bit shifty (that’s even more true now with multinationals and differing laws in other countries). The corporations that find the most edge survive, and the rest fail.

          As consumers we LOVE that, because it results in more and better products at lower prices. That’s exactly how we WANT them to act.

          Shareholders are at the mercy of having a CEO that knows just how far he or she can push the envelope of legality and decency.

          At the mercy of? I would call that a benefit. Shareholders want maximum return, and it they don’t think they are getting it, they are free to sell their shares and move their resources elsewhere.

          Short of the legal system, corporations are held accountable ethically and morally externally by transparency like Dow was here (and by Michael Moore) and internally by labor unions. You would be surprised how many calls for union committeemen are initiated for employees by sympathetic management who agree their employee is morally and ethically right but they can’t do anything because no written rules were actually broken. You have to use alternative options to solve problems when you don’t have definitive written language on your side.

          Whatever.

          Those alternative options are not available to individual employees because they don’t have any power other than quitting their job.

          And that’s a lot of power. You consistently mis-characterize the employer/employee relationship as being extremely unequal and unfair, when in reality employers need workers as much as workers need jobs. If an employee is valuable, they shouldn’t have much trouble finding employers who recognize that value.

          I know you can dredge up counter-examples, but in general it’s true.

          Of course if employees have overpriced themselves through the use of union clout, they may have some trouble, and I can understand why they would be nervous.

          • Some people here expect corporations to do what is generally morally and ethically acceptable even if they are following all current laws, companies such as Dow show they don’t, and I doubt Dow is alone. Why is that behavior unacceptable but employees should have to quit to remedy the same behavior on the individual level? By the same logic, if you don’t like what Dow is doing, don’t buy their stock or products.

            Ron, I’ve seen unions do what I consider bad and good. I personally think the good outweighs the bad. I can appreciate and understand those people who have had different experiences than mine with unions, and there ARE a lot of them.

          • Walt

            Some people here expect corporations to do what is generally morally and ethically acceptable even if they are following all current laws, companies such as Dow show they don’t, and I doubt Dow is alone.

            Some people here expect corporations to do what is in the best interest of the owners, and that may include asking for special treatment, While not something many people admire, it isn’t shocking.

            Keep in mind that just asking for special treatment doesn’t make it so, as neither Dow or any other company can control whether gas producers export LNG without enlisting the help of government regulation. That’s where the really unethical activity occurs.

            If I ask you to steal a cookie for me, I might be called unethical, but if you actually do it, you’re a criminal.

            Why is that behavior unacceptable but employees should have to quit to remedy the same behavior on the individual level?

            What behavior, exactly, are you talking about?

          • “What behavior, exactly, are you talking about?”

            Being pressured to loan money to a supervisor or have sex with him when it is only your word against his (both male and female victims)
            Being forced to work with caustic fumes and chemicals that hospitalize workers but meet OSHA air testing standards (the standard was lowered by OSHA when union safety records showed a high mortality rate for machining fluid and lye)
            Being forced onto a less desirable job because you will not give to the charity of a supervisor
            Given a repetitive lifting job when medical wrote a restriction on lifting from a work injury and denied sick leave

            Your choice for all the above would be to quit or just put up with the abuse because you will almost never have enough proof for a legal case or it is not illegal. Don’t think of a 3000 – 4000 person factory like a family because it is a more like a filthy city with all the immorality and grittiness of one (pimps, hookers, liquor bootleggers, drug pushers and addicts, loan sharks . . . and many of them are bosses). Unions might not solve all the problems in these big factories; however, they can solve many and at least you’re not alone for the ones they can’t solve.

          • Being pressured to loan money to a supervisor or have sex with him when it is only your word against his (both male and female victims)
            Being forced to work with caustic fumes and chemicals that hospitalize workers but meet OSHA air testing standards (the standard was lowered by OSHA when union safety records showed a high mortality rate for machining fluid and lye)
            Being forced onto a less desirable job because you will not give to the charity of a supervisor
            Given a repetitive lifting job when medical wrote a restriction on lifting from a work injury and denied sick leave

            thanks for the details, Walt. Those are all legitimate complaints and I think everyone agrees that they shouldn’t happen, and if they do they should be remedied. They also sound like problems with immediate supervisors or 1st line managers, and not company policies.

            What you may not be familiar with is that many companies both large and small, have corporate policies in place to help correct just such abuses. Many have “speak up” programs which allow an employee at any level to voice a concern, in writing, anonymously if desired, to upper management.

            There are also “open door” policies that allow employees to bypass their immediate boss to speak privately and confidentially with that bosses boss, or a higher level of management if the employee doesn’t feel their concerns are being addressed adequately.

            There are, in fact, policies that call for an annual meeting with your bosses boss, in which he/she will ask how you are doing, how the company is treating you, how your immediate boss is treating you and whether you think your immediate boss is doing a good job. You may also be asked what he/she can do to help you further your career.

            These are typically non-union companies, as there is little a union could do to improve on an employees well being in these cases.

            Why would any company spend money on these types of programs? Well, because some companies actually value their productive employees and want to keep them. They understand that an employee who is an asset to the company can easily find employment elsewhere if they are not fairly treated, or if their work environment is unpleasant. It’s not only a matter of ethics, but of the practical understanding that if you take good care of your valuable tools, they will serve you well for a long time.

            All of that is out the window in a union shop where it’s “us vs them”, workers are just so many identical units of labor and the company is the enemy.

            Don’t get me wrong: I understand that since we are dealing with human beings, no work setting can be problem free, but many are not as bad as you’re used to.

            Your choice for all the above would be to quit or just put up with the abuse because you will almost never have enough proof for a legal case or it is not illegal.

            No, there are other good options for employees in companies that have good employee relations policies in place. Like I said, you might not be familiar, having worked in a union environment so much of your life.

            Don’t think of a 3000 – 4000 person factory like a family because it is a more like a filthy city with all the immorality and grittiness of one (pimps, hookers, liquor bootleggers, drug pushers and addicts, loan sharks . . . and many of them are bosses). Unions might not solve all the problems in these big factories; however, they can solve many and at least you’re not alone for the ones they can’t solve.

            I guess it depends on why a person goes to work for any particular company and not another. What you describe is to be expected if the company is always seen as an adversary and “the enemy”.

            Do you know if Toyota’s Georgetown, KY plant is like a filthy little city?

          • “Do you know if Toyota’s Georgetown, KY plant is like a filthy little city?”

            No, but I am familiar with GE and Nissan, both non union, and what I speak of happens there. I try to help out, but my family down South are union haters, so I just shake my head when they tell me their stories. I hear tell of a union shop supervisor’s stand up cabinet with a male sex doll in it being put in a rail car with car parts and shipped 1,800 miles away to Texas because he sexually harassed the wrong girl at GM. He got the cabinet back a month later. For some reason he assumed he would be in that cabinet getting shipped to Texas if he harassed the girl again, and as far as I know he didn’t. Sometimes it helps for someone to have your back.

            I’ve worked many jobs at non union places over the years, and never saw the abuses I saw at GM. I am at two now. So, Ron, you may be correct that part of the problem is self-inflicted, but the union did not decide a grand plan to hire retired prision guards as supervisors to show us who was boss. A lot were wife beaters and one beat his wife to death, rolled her up in a rug, and dumped her in the landfill before getting caught. Some people you have to work with are just plain bad and any help you have to deal with them is deeply appreciated. You don’t quit a high paying job when you have a family to support and it is the best you can do. Things have been pretty tame the last 15 or 20 years, and I am now retired from there.

          • I hear tell of a union shop supervisor’s stand up cabinet with a male sex doll in it being put in a rail car with car parts and shipped 1,800 miles away to Texas because he sexually harassed the wrong girl at GM. He got the cabinet back a month later. For some reason he assumed he would be in that cabinet getting shipped to Texas if he harassed the girl again, and as far as I know he didn’t

            Heh! I love it.

            So, Ron, you may be correct that part of the problem is self-inflicted, but the union did not decide a grand plan to hire retired prision guards as supervisors to show us who was boss.

            Again, there’s that adversarial position of us vs them. I can’t imagine that happening at a company that valued and respected employees and didn’t consider every employee just another generic unit of labor.

            I guess to be fair, I should point out that in my examples above, the employees were all capable of working without direct supervision, they all could easily dress themselves in the morning, and they even tied their own shoes. Some of your experience at GM may have involved differently skilled people.

          • Ron,

            Well, we can see how some companies operate at the top buying votes and influencing legislation for their own benefit and how some operate at the bottom harassing employees. Are we to expect middle management to be saints?

            Low skill jobs that pay high wages keep people from leaving who would usually not tolerate such abuse. Yeah, some can’t do much better and will do anything to support their family even if means forced sex or paying the boss to keep their job. I try to teach my students how to think for themselves, but I do preach to them to have more skills with more options so they have to eat less shit. Unions have their place, but they can’t replace self-sufficiency.

            I have not seen widespread employee abuse at GM in a few years. Dropping from 4000 employees to about 1000 employees and a workforce aging from their 20s to 40s and 50s tamed a lot of people.

            I can’t see unions being relevant in the 21st century if they have an adversarial relationship with management and problems they can’t work out quickly. I think legislators who have Dow whispering in one ear need someone else like unions whispering in the other ear: power needs its checks-and-balances.

    • So, corporate greed does exist.

      Of course it does.

      What is so surprising about a company legally trying to maximize profits for their shareholders?

      Absolutely nothing, in fact it is a companies only job to maximize profit for the owners.

      Often the invisible hand finds a way into your pocket.

      No, Walt, only government with a monopoly on the use of force can get it’s grabby hand into my pocket while holding me at gunpoint. All others must plead with me and try to convince me it’s in my best interest to take money from my own pocket.

      Now, sometimes private actors can “partner” with government to use its force to rob me, but they can’t do it on their own.

      In this case it’s quite clear that Dow & others are asking government to rob producers of nat gas, and everyone associated with them. They have no way of doing it on their own.

  6. Shameless rent-seeking by Dow?

    Of course! Who is surprised?

    It is the fiduciary duty of Dow executives to try to seek rent. They are there to maximize profits for their shareholders, not to serve the national interest. They are doing what they should be doing.

    Dow Chemical will send to hell USA national interests if Dow Chemical makes more money doing so. Get it? That is what they are in business to do—maximize profits for shareholders. Being a good citizen is not in their charter.

    Dudes, get real. Getting into a pique about this…and did you know that casinos in Las Vegas try to make money from suckers?

    • More generally it is the duty of every CEO to seek rent, for their shareholders. It has always been so. In particular in a commodity business one wants to seek rent. A lot of companies seek rent from local governments to locate in places (property tax reductions and investment in infrastructure etc.)

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