Be pragmatic about energy, Dow CEO says

— -- Dow Chemical CEO Andrew Liveris is no newcomer to the energy debate. He's been saying that the USA needs a comprehensive policy since 2004, when a barrel of oil was less than $40. His company, which makes Styrofoam insulation, pesticides and chlorine, among other products, has been so slammed by energy costs that its net income dropped 27% in the second quarter, and it continues to raise the price of its products. Liveris, 54, talked with USA TODAY management reporter Del Jones. Following are excerpts, edited for clarity and space.

Q: It's the political season, and energy has become a campaign issue. As a matter of disclosure, what presidential candidates have you and your wife contributed to?

A: (Mitt) Romney, (John) McCain and (Hillary) Clinton. I'm Australian. I can't vote, and I have no partisanship with U.S. politics. I'm utilitarian and support those with the best ideas and policies.

Q: You say the U.S. is shooting itself in the foot regarding energy. If you could wave a wand, what could be done to get us out of a mess?

A: We have seen a tsunami of price increases. A country this advanced should use every single weapon. Energy is complex, but the U.S. has major weapons it can bring. Get them on the table. Forget partisanship. Forget who gets what share of the pie. Don't worry about an oil company enriching itself. Go straight to what is pragmatic and practical.

First, remove the ban on drilling, and do it environmentally responsibly. Second, put efficiency into place with building codes, efficient power stations and fuel standards on cars. Third, find deployable alternatives. Some will require Apollo-like projects. Two examples: Why do we still do a once-through burn to create nuclear energy? We are the Saudi Arabia of coal, but coal brings its attendant, which is CO2. A government investment could solve those.

Q: What one thing would help most?

A: Efficiency. Dow Chemical dow has improved efficiency by 22% from 1995 to 2005. If the country did that, we would not import one drop of oil.

Q: Efficiency is something the Democrats and Republicans may agree on. Is there anything else that could get past a legislative stalemate?

A: Coal gasification could happen if Democrats get away from the notion that coal is dirty. We have the ability to use coal cleanly. It's complex, but you could get both sides to at least consider it. We're not going to solve our problems with wind. You have to use fossil fuel somehow. Dare I say it: responsible drilling. It's getting harder and harder to go down that path, but we need bipartisan efforts.

Q: Drilling opponents say it would endanger the environment and have minimal impact on energy prices, around 2 cents a gallon.

A: That's ludicrous. It would send an enormous signal. If China can drill in Cuban waters 50 miles off the coast of Florida, I find it almost insane that people would worry about spoiling beaches, when the U.S. has the best technology in the world.

Q: What U.S. energy steps have backfired?

A: Corn-based ethanol, one of the dumbest ideas of all time. Its energy balance is poor. You just move the problem around, as we've found out on the food side. The whole hydrogen (fuel-cell) approach is dumb. Hydrogen is an energy carrier, not a source. It's nonsense. Another dumb thing I've heard: "Why should we do anything, because it will take five to seven years before anything happens?" You're telling me we shouldn't do anything logical, because I can't solve my immediate pain?

Q: Why has Australia also rejected nuclear?

A: It's the fear factor. It's a lack of confidence in our ability to solve nuclear waste. We've offshored the problem, and nuclear waste becomes a weapons issue. Why don't we use nuclear ourselves and come up with solutions on how to store it and not get it in the wrong hands? It would be a tremendous boon if this country built 50 nuclear plants in the next 20 years. The first three could be government subsidized. Expensive, but there is $13 billion in government funding out there, $7 billion alone spent on corn-based ethanol. We could redirect that to figure out clean coal and bio-fuel.

Q: Why can't the private sector do more?

A: Frankly, when free markets prevail, we have to shut down factories and replace them overseas in places like Saudi Arabia, Kuwait, Libya, Russia, Brazil, Thailand, China and Oman, where governments lock in energy availability, guarantee prices and de-risk our investment. The chemical industry is down 120,000 jobs in the USA in the last five years. Manufacturing as a whole is down 3 million jobs.

Dow is investing $40 billion to $50 billion in the next five to seven years. A lot of that is already in flight to countries where governments work with us through their national oil companies. In Brazil, it's through a company that converts sugar cane into ethanol, a much better energy converter than corn.

Q: So we lose jobs unless the government subsidizes your energy costs?

A: It's common in many countries to regulate the price of energy inputs to spur economic downstream investment. It's saying that energy is a national resource. You can burn it or add value to it. For every $1 Dow Chemical uses in oil or gas, we generate $20 of GDP. You need to give certainty to those making large capital investments. Not just chemicals but steel, paper, metals, even cars. That's how other countries are building industries.

Q: Where does it stop? Dow Chemical is raising its prices. I'm sure your customers would like that regulated, too.

A:My answer is self-serving, so you're going to have to forgive me. I'm for regulating certainty. The enemy is volatility. For me to make a $20 billion investment, it really makes a big difference if oil doubles or falls in half. The U.S. could take 10% of the resource, as they do in the Middle East, and give certainty to those who add value.

Q: How about taxing oil so it never falls below $100 a barrel? Would that spur investment in alternative energy by de-risking investments that would be wiped out if oil prices fall?

A: Yes. I want stable prices for manufacturers and a price floor that would protect the innovators, although the floor should be much lower than $100. We need a Silicon Valley equivalent for energy.

Q: What's wrong with T. Boone Pickens' campaign to replace foreign oil imports with wind, solar, nuclear, coal and natural gas for cars?

A: Cars running on natural gas is problematic. Forget the distribution system for a while, which is its own headache. It's implying that we have the natural gas. We do, but we're not drilling for it, so if we increase demand for natural gas, then I can guarantee the price will hit the price of oil at the speed of light. Hybrid cars may be a good way to go if we allow electricity from nuclear or clean coal. Otherwise, it's robbing Peter to pay Paul.

Q: Does a U.S. military presence in the Middle East stabilize or destabilize oil prices?

A: We certainly aren't getting more oil, if that was the intent. We aren't occupying Iraq for the resources. With new demand from China and India, maybe it is irrelevant. Maybe it didn't matter if we are there or not. Hopefully we did something great for the people of the region, but I travel and I listen, and when I'm in the region, people are pretty unhappy with the U.S. presence.