PCA study shows correlation between oil prices and asphalt prices

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

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

Historically, rising oil prices have been highly linked with rising asphalt prices. “During the last 10 years, asphalt prices rose 7 percent for every 10 percent increase in oil prices,” says Edward Sullivan, chief economist and group vice president at 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.”

Given the depressed level of oil prices, 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 to the increased use of cokers at oil refineries that reduce the amount of liquid asphalt from each barrel of oil.