May 28 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, will raise prices the most in the company's 111- year history because of surging costs for energy and raw materials used to make Styrofoam, pesticides and plastics.

The ``unparalleled'' increases of as much as 20 percent on all of Dow's 3,200 products are needed after a 42 percent jump in first-quarter spending on raw materials and energy, Chief Executive Officer Andrew Liveris said today. The increases take effect June 1, the company said in a statement.

Dow plans to pass on some of an expected $7.4 billion increase in energy and materials costs this year that Liveris said is due partly to the U.S. government's failure to develop policies to solve a ``true energy crisis.'' Higher food, fuel and metals prices are contributing to inflation and helped boost U.S. consumer prices 3.9 percent in the year ended in April.

``This is our largest across-the-board increase,'' Liveris said today in an interview at the company's headquarters in Midland, Michigan. ``We have a tsunami landing on us here,'' he said, adding that Dow has been boosting prices for four years.

Dow gained 60 cents, or 1.5 percent, to $40.83 as of 4:15 p.m. in New York Stock Exchange composite trading. The shares have fallen 9.7 percent in the past year.

Rising natural gas and crude oil prices are increasing costs for naphtha and other energy-derived chemical ingredients that account for half of Dow's total expenses. First-quarter profit fell 3.3 percent to $941 million because of higher costs.

`Leading the Charge'

``Dow is probably leading the charge here in being this aggressive, and others are probably going to follow suit,'' Tom Uutala, who helps manage $60 billion, including Dow shares, at Victory Capital Management, said in a phone interview from Cleveland.

Rohm & Haas Co., the world's biggest producer of acrylic- paint ingredients, implemented surcharges on all products on May 1 that will reflect changes in raw-material prices, Chief Operating Officer Pierre Brondeau said in an interview today.

Lanxess AG, Germany's biggest publicly traded specialty- chemicals maker, said today it is confident it will be able to pass on its higher costs.

Liveris is seeking acquisitions and joint ventures that will give the company access to lower-cost materials.

Kuwait-based Petrochemical Industries Co. agreed to buy 50 percent of Dow's commodity-plastics unit for $9.5 billion in December in a transaction Liveris said would provide the world's largest plastics business with cheaper raw materials.

Energy Policy

Liveris said today the U.S. government's failure to develop a comprehensive energy policy is causing the nation's chemical industry to lose ground to global competitors.

``The country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy,'' Liveris said in the statement.

Crude oil traded in New York has doubled in the past year and reached a record $135.09 a barrel on May 22. Natural gas climbed 59 percent this year.

To contact the reporter on this story: Dale Crofts in Chicago at dcrofts@bloomberg.net.

Last Updated: May 28, 2008 17:03 EDT