Rising Fuel Prices & Its Effects on Construction Industry
Rising Fuel Prices & Its Effects on Construction Industry (A Perspective Piece)
With fuel prices on the rise, businesses in every industry are feeling the pinch. The increase in fuel prices has caused a rise in the cost of materials, as well as an increase in labor cost because petrol, diesel, and other oils are used for the production of almost every good.
Furthermore, those businesses that rely on fuel like transportation or construction, are struggling to find ways to reduce costs and still keep up with the schedule. Here’s how the construction industry is affected by this fuel price hike:
Fuel Price Increase & Its Effects on Construction Industry:
Construction involves a range of equipment, tools, and machines that need to be hauled from one point to the other several times a day.
This means the transport trucks moving these items burn a lot of fuel on a daily basis and the contractor is the one paying for this cost.
Fuel in Machines:
There are various machines used for construction, excavation, and demolition of already built properties. For example, below are three machines we use every day:
- Cat 289 – a Skid Steer
- Cat 323 – a Midsized Excavator
- D4 – a Midsized bulldozer
Just these three machines alone use 210 gallons of fuel a day – 30 for our skid steer, 90 for our excavator, and another 90 gallons for our bulldozer. And since these machines are used for every excavation and construction job, paying for their fuel cost is a must – there’s no way around this.
According to the US Energy and Information Administration (EIA), the average diesel price was $5.509 for the week of May 2nd, 2022 while the same gallon would’ve cost us only $3.142 a year prior.
Using 210 gallons per day, that means we are now paying $1,157 per day as opposed to $660 last year. That adds up to over $23,000 per month in fuel to power these 3 small- to mid-sized machines – over $9,000 per month more than one year ago! And if we also add the 120 gallons used by our Cat 745 per day – a truck that hauls our on-site materials for bigger jobs, you can tack on $661 per day, up from $377 just one year ago.
Now you are getting an idea why excavation services cost so much. These costs cannot be borne by the excavation and construction companies alone or they would go bankrupt in a year. This cost is passed on to the customers in the form of increased excavation and construction prices leading to higher quotes.
What Do We Expect Going Forward?
We’re already seeing the effects of the fuel pricing increase in most industries. With the political issues, Russian war and economic upheaval, and travel seasons coming up, we don’t believe fuel prices will go down any time soon. The long-term result we expect is a continued, slow increase in the cost for almost every item, whether related to construction and transport or not. This is because fuel is the core element used in the production of almost every product because most machines run on fuel, and supplies are shipped by (typically diesel-) fueled vehicles. That being said, many – like CarAndDriver.com – expect fuel prices to decline slightly by end of the year.
For now, most homes can stomach the inflation – after consumer savings became a priority for many families during the pandemic, helping them to adjust to the new pricing. Low-income earners will likely be hit the hardest as fuel and food (which is shipped with fuel) tend to make up the largest portion of their discretionary spending. Despite these figures, consumer optimism is on the rise – the Conference Board Consumer Confidence Index showed a slight increase in March. For now, “the show must go on” and we believe that people adapt – and adapt we shall!