The price of crude oil doesn’t just affect the cost of driving vehicles; it also impacts the overall cost of installing the asphalt pavement those vehicles drive on. Since asphalt is, in part, a byproduct of the crude oil refining process, when oil prices fluctuate, so does the price of asphalt paving projects.
Just how much do oil prices stand to affect your budget for your upcoming asphalt project? Let’s take a look at what you need to know below.
The Correlation Between Oil Prices and Asphalt Prices
Historically — over the last 10 years, that is — asphalt prices have risen an average of 0.7% for every 1% increase in the price of crude oil. But that increase is related to the cost of the raw materials necessary to produce asphalt; it’s not the only increased cost you’ll need to consider. Oil prices also affect the cost of transporting, delivering, and installing asphalt pavement, so those increased expenses may also factor into the overall oil-related price increase of an asphalt paving project.
Time Gap Between Oil Price Fluctuations & Their Effect on the Asphalt Price Index
When oil prices increase, they don’t have an immediate impact on the price of asphalt. Rather, there’s a bit of a time gap (typically a number of months) between a rise in the crude oil index and a corresponding increase in the asphalt price index. This time gap varies from state to state, and the magnitude of the price increase also varies based on location.
What does that time gap mean for the price of your asphalt project? That a project estimate may not be completely accurate depending on when you receive the estimate versus when you plan to begin the project.
For example, let’s say you get an estimate for your asphalt paving project in April. The price of crude oil increases or decreases around the same time, but you don’t plan to begin your project until autumn or even the next year. Given the time gap between your estimate and the start date of your project — and the time gap between the change in the oil index and the related change in the asphalt index — the overall price of your project may also change.
If there’s an even larger time gap (you’re budgeting for a project several years down the road), the price fluctuation may be more substantial.
Leave Some Wiggle Room in Your Project Budget
Since the oil market is largely unpredictable — but prices have historically increased year over year — it’s always a good idea to leave room in your budget for potential oil-related project price increases. This is especially true if you’re budgeting for asphalt maintenance over a multiple-year period.
It’s also important to note that the price of crude oil isn’t the only factor that may affect long-term maintenance costs associated with asphalt pavement. Like oil costs, harsh weather is also largely unpredictable. If your pavement suffers weather-related deterioration or damage, the extent of that damage may also increase the amount you need to budget for your project.
Request a Free Estimate & Consultation for Your Asphalt Paving Project Today
Getting ready to plan a commercial asphalt paving project in the Twin Cities? Get in touch with our team at Bituminous Roadways to get a free consultation and estimate. As the leading asphalt paving contractors in the Minneapolis/St. Paul metro, we’re dedicated to delivering exceptional customer service and premium-quality workmanship.
If you’re ready to get your project off the ground, feel free to give us a call today at 651-686-7001 or request a consultation online, and we’ll be in touch!