How Oil Prices Affect Asphalt and Roofing

How Oil Prices Affect Asphalt and Roofing | Royal Oak Property Services

Asphalt shingles have been a popular roofing material for years due to their affordability and accessibility. However, fluctuations in oil prices can cause the cost of asphalt shingles to change as well. In recent years, oil prices have trended up, and roofing costs have risen in tandem.

Why do oil prices influence asphalt costs and why are they rising in recent years? There are several reasons.

Materials

The most obvious connection between asphalt and oil is materials. Asphalt is a byproduct of the petroleum refining process. This means it’s created when companies make gasoline and diesel fuel from crude oil.

It’s a simple matter of costs getting passed on to the consumer: The higher the oil price, the more companies have to charge to make up the difference. The good news is that because asphalt is just a byproduct and not the primary product, it’s likely to stay relatively inexpensive.

However, size of a project can cause even small relative material price increases to change dramatically. A large commercial building with acres of roof space, a mall with massive parking lots or a HOA development with many internal streets in need of repaving… each could face exorbitant added costs from just a few cent increase in materials costs.

Transportation

As oil prices go up, so do fuel prices, which means more expensive transportation. This affects companies like Royal Oak Property Services who work in the roofing and maintenance sector, as it costs more to fill up the tanks in company vehicles. This can result in higher rates for customers.

There’s also the effect of transportation costs on the asphalt. When it costs more to ship products, manufacturers may raise the price to account for added transportation expenditures. This gets passed on to distributers, who pass it to customers.

Environmental Issues

The most recent Global Environmental Outlook, released in 2019 by the United Nations, makes it clear that climate change has put human life in danger. In response, many countries have taken steps to move away from reliance on fossil fuels. This has created several factors that may drive up prices:

  • Government regulations that require investment in new equipment and technologies
  • Companies exiting the market as a result of these regulations
  • Pressure to invest in green energy production

These developments may make the refining process more expensive and the end products less accessible, which usually means higher costs for consumers.

Geopolitics

Approximately 25 percent of asphalt used in the US originates from Venezuela. After the last Venezuelan presidential election, ties with the US have become even more strained, and the country is facing violence within its borders. This will likely affect exports and drive up costs.

Profit

With increased oil prices, refineries are usually more interested in making high-profit products like gasoline. While asphalt will likely still be available due to its nature as a byproduct, companies probably won’t invest in its production, making it scarcer and therefore more expensive.

Partnering your commercial, retail or HOA properties with a company like Royal Oak Property Services, enables properties to stay on top of trends such as rising oil prices that may affect the bottom line. Regular roofing and parking lot maintenance is a given. The shock of higher than expected pricing doesn’t have to be. At Royal Oak, the team engages its clients with knowledge of best timings and best practices to ensure property maintenance is taken care of as efficiently and cost effective as possible. Give us a call at 310-872-5999.

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