Asphalt supply, price worrisome

Posted: Tuesday, June 07, 2005

ANCHORAGE - The price of ingredients in asphalt has nearly doubled over the last year, jacking up the price of the material and taking a bigger bite out of construction budgets.

With a busy building season, construction managers also are wondering if supply will keep up with demand.

Phil Anderson of Exclusive Paving in Fairbanks told the Alaska Journal of Commerce his cost for asphalt oil has gone from $180 a ton last year to more than $300 this year, a 70 percent increase. Contractors in Anchorage saw a similar price hike.

Asphalt oil is the black, tar-like substance that is mixed with gravel to make pavement.

The cost increase can be attributed to several factors, contractors and suppliers said.

Only two refineries make asphalt oil in Alaska: Tesoro Alaska Co. in Kenai and Flint Hills Resources in North Pole.

Both say the price of asphalt oil reflects higher crude oil prices. North Slope crude has hovered near $50 per barrel for months.

The high prices have driven up the cost for everything that is manufactured using oil, including gasoline, heating oil and asphalt oil.

Alaska also is projecting a busy construction year, which is stretching supplies.

The state expects to see more than $5 billion in construction work this year. Millions of those dollars will be spent in paving, including several major airport projects, miles of road work and smaller projects such as commercial parking lots and neighborhood driveways.

Flint Hills recently announced to its customers that it will not supply asphalt oil to contractors outside the Fairbanks area this season.

"There is such a heavy demand this year it only makes sense to supply it here rather than ship it outside the area," said spokesman Jeff Cook.

Cook said that demand is double the average of the last few years, with a forecast of 51,000 tons this year. The average from 2000 to 2004 was 25,000 tons. That forecast level is beyond the capabilities of Flint Hills, Cook said.

Flint Hills did not produce asphalt oil for at least a week in late May because its storage tanks were full and contractors were not asking for the product.

Cook would not disclose production amounts for the rest of the year, but a spokesman at the state Department of Transportation and Public Facilities said Flint Hills reported that it would produce 34,000 tons of asphalt oil this year. DOT will demand 33,000 tons of that for use in its northern region.

The only statewide asphalt producer is Tesoro, which is making a record amount of asphalt oil this summer, said refinery manager Steven Hansen.

"We're making everything we can," he said. "We're at a maximum production mode and our facility is working 24/7 to supply asphalt."

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