PCA: as oil prices fall, cost of asphalt is on the rise

PCA: as oil prices fall, cost of asphalt is on the rise
Published: 18 February 2015

Despite falling oil prices, the cost of paving with asphalt continues to rise across the US. A recent analysis from the Portland Cement Association (PCA) shows that asphalt prices have reached record highs during the last six months.

Oil prices declined 44 per cent in the second half of 2014, and during the same period asphalt prices increased 1.5 per cent. A decline in asphalt prices has yet to materialise given six months of data since the beginning of the oil price decline, the normal lag period between the two commodities, the PCA noted in statement yesterday.

Historically, rising oil prices have been highly linked with rising asphalt prices. "During the last ten years, asphalt prices rose seven per cent for every 10 per cent increase in oil prices," said Edward J
Sullivan, chief economist and group VP of the PCA. "In contrast, concrete prices have not increased anywhere near that pace. As a result, concrete paved roads held both an initial and life-cycle cost advantage when compared to many types of roadways," he added.

Given the depressed level of oil prices, the PCA notes that asphalt roads should have regained their competitive advantage over concrete in both initial costs and life-cycle costs. Instead, although PCA estimates that falling oil prices will lead to stronger economic activity and job creation in most states, departments of transportation will not see any price break.

Analysis points the increased use of cokers at oil refineries that reduce the amount of liquid asphalt from each barrel of oil and this decrease in supply occurring at the time when cucle demand is increasing, the PCA concludes.