Over the last few years, as oil prices were rising at unprecedented rates, asphalt prices followed. Because asphalt is a byproduct of petroleum, it seems reasonable and somewhat predictable that this price increase would occur. However, when oil prices have fallen there was not always a corresponding drop in asphalt shingle prices. Therefore, putting off a roof replacement - even for a year or two - can be a costly decision.
Why is this?
It’s a fair question that deserves an answer - so we will address current shingle market conditions and offer the WoW perspective.
The economic principles of supply and demand are constantly at work in the roofing industry, in some ways that you wouldn’t necessarily expect. Other factors have also weighed in to drive up costs. This is a quick snapshot of how each of these components exert their force on asphalt prices.
- Supply - The US is under supplied by over 5% of demand for asphalt, or 257,000 barrels a day in 2012, for two main reasons: not enough refineries and increased profits on other uses for petroleum. First, there has been the decline in small to medium size refineries - the primary source of asphalt. There were about 325 such refineries in 1980, compared with about 125 today. Fewer refineries means smaller output. Second, many larger refineries invested in equipment that converts oil into fuel, which is more profitable than asphalt. This and other more profitable uses of these petroleum-based products has decreased the amount of asphalt produced. In the past, about 40 percent of each barrel of oil would be turned into asphalt products. Today, it is as low as 10 percent.
- Demand - Although the demand for asphalt roofing materials is strong, the demand to use asphalt in the paving and road maintenance markets has been stronger. In addition, the increased demand from recent storm activity has further strained the limited supply.
- Other factors - The cost of diesel fuel remains extremely high, which directly impacts the cost of shipping and delivery. Many suppliers have long-standing fuel surcharges in place with no expiration date in sight. These costs and fees directly impact the final cost of asphalt shingles to homeowners.
Our hope is that this brief insight into the supply, demand and contributing factors of asphalt prices help homeowners understand the material costs associated with a new asphalt shingle roof. Our suppliers have committed to keeping us informed of shingle price changes, and we commit to do the same with you. As always, all Windows on Washington roofing estimates are good for a full 30 days so you never have to worry about a bait and switch. We remain committed to providing our customers with solutions to their home improvement challenges using best-in-class materials and expert installation, always at a fair price.