Davos WEF
Davos WEF

Oil supply is the problem, not demand: Dow CEO

Dow Chemical CEO: Oil headed north of $45
Dow Chemical CEO: Oil headed north of $45

A stable, low oil price—even at $45 per barrel—is good for Dow Chemical because the drop in crude is supply-driven and will act as stimulus, CEO and Chairman Andrew Liveris told CNBC on Wednesday.

"Demand has held up. This is supply-driven with, I think, a financial overreaction," he said during a "Squawk Box" interview from the World Economic Forum in Davos, Switzerland.

"Where should oil stabilize? It comes down to supply and demand," he said. "If it's not weak demand—which I just said it isn't yet—then it's a supply side factor. Supply side ... is a stimulus to all the economies that have this as a discount right now."

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Demand in the United States is getting even stronger, he said, and China recently launched new stimulus measures, which should help fuel growth. Ultimately, the benefit of cheap oil should find its way into the European economy, he added.

The volatility of oil's downward price movenot the actual priceis the problem, but oil will ultimately stabilize, he said. When it does, it will unlikely be as low as $45.

About 30 percent of Dow's business is still exposed to the price effect of a reduction in oil, he said. At the same time, he added, Dow has reduced import costs from $20 billion to $12 billion in today's oil price market.

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"That $8 billion I should be able to pocket. I should, but I won't, because I still have 30 percent of the portfolio that has a price effect. Weak demand exacerbates that price effect, and should happen immediately," he said. "We're getting some price pressure, but not as much as you would normally see, which means demand is actually still there."