As tensions with Iran mount, oil prices around the world are spiking and threatening to hinder the slowly recovering building sector within the U.S. and elsewhere.
According to AAA, the national average for diesel is currently $4.06 per gallon, up nearly a half dollar from prices a year ago. Economists predict crude oil and fuel prices to increase further as political negotiations with Iran continue to deteriorate, bringing a $5.00 national average worryingly into the realm of possibility for 2012 and beyond.
While many contractors and firms work fuel price fluctuations into contracts, the volatile and highly-competitive construction markets will make cost predictions difficult and could negatively affect building projects in the areas that need them most.
Rising material prices – inflating at nearly twice that of the U.S. Consumer Price Index – are worsening the situation, in that fuel prices are taking a bigger bite of construction companies’ bottom line.
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Many refineries in the United States have closed their doors because of a rapid drop-off of demand in recent years, thanks to the sudden and long-reverberating economic downturn. Now, as the building sector begins to recover and demand begins to increase, fewer refineries mean fuel production is down, escalating prices even further.
Iran controls many crucial oil gateways within the Middle East, and growing conflict threatens to cut off major supply routes to Western countries. Analysts and business owners alike are watching with wary eyes as fuel prices promise to climb even higher as we approach the summer months and the height of the building season.