Asphalt shortage: High cost of oil hurts byproduct supplies, and street maintenance will suffer for it
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Get used to potholes on Utah roads.
The escalating costs of asphalt because of shortages means the Utah Department of Transportation will scale back on plans for routine road fixes this summer, said Jim McMinimee, the agency's director of project development.
"Asphalt is really starting to be a problem to us," McMinimee said. "We've already been told our regular road-maintenance programs have to take a back seat."
Shortages leave contractors unable or unwilling to sign binding contracts for roadwork because they don't know what asphalt will cost or even whether they could get it by the time a project starts, he said.
The shortages are the result of producers having lower-than-usual asphalt inventories this summer, in part caused by the high price of petroleum. Refiners consider asphalt a waste product, but with oil hovering around $74 a barrel, they are using extra processing to squeeze out every bit of gasoline, and that also reduces the supply of asphalt, McMinimee said.
But Tom Case, manager of Granite Construction of Utah, a large asphalt contractor that takes on big jobs such as highways and airports, said he expects the asphalt shortage is a seasonal problem that will stabilize.
Granite Construction is honoring contracts already signed, Case said. If the contract underestimated the actual price of asphalt for private projects, adjustments might be renegotiated.
Public-works jobs generally include cost-adjustment clauses that may allow contractors to make up the difference.
"Or, you can just honor your price. We've done that, too," Case said. "It's a choice each company has to make."
Granite also is a supplier of asphalt mix, which it sells after adding other materials to the liquid asphalt they buy from refiners or other suppliers.
The shortages could ding those sales, Case said.
Competition from India and China drove asphalt prices up 43 percent from April 2005 to April 2006, according to the U.S. Bureau of Labor Statistics.
That's a national average, Case said. Local and regional spikes could be even higher.
While UDOT recycles as much used roadbed as it can, asphalt projects aren't allowed to contain more than 10 percent recycled material, said UDOT spokesman Nile Easton.
In some regions, the shortage is so acute that cities aren't able to smooth uneven patches left after streets are dug up for utility work.
That hasn't happened yet in Salt Lake City, said public works spokeswoman Sheila Yorkin.
Still, she said, sometimes there isn't enough asphalt available for some jobs. "It's a bit of a problem out in the market," she said.
There is a bright spot for road construction, however: Cement is now widely available.
In March, concerns about general construction material shortages and particular worry about being able to rebuild the Gulf Coast after Hurricane Katrina led to a trade agreement between Mexico and the United States that lifted tariffs on Mexican cement, a crucial component of concrete.
Last year, contractors in Utah were having difficulty getting enough cement for a variety of building projects. According to transportation consultant and former UDOT Director Tom Warne, at least one cement plant in California was rationing its product.
McMinimee said UDOT prefers to use concrete for urban road projects when the price is right because it has a 20-year life cycle. Asphalt overlays, by comparison, last four to seven years and require more maintenance than concrete.
UDOT now is asking contractors to submit job bids for concrete or asphalt.