Focus

If you aren't worried about oil shortages, particularly those caused by Venezuela, perhaps you should be: They're beginning to drastically affect the roofing industry.

Manufacturers of asphalt-based roofing materials have been warning their customers about potential price hikes if oil shortages continue, and several manufacturers already have increased prices. In addition, at least one manufacturer is charging an energy surcharge for its asphalt-based materials. The surcharge is subject to change with market conditions. Unfortunately, there may not be a reprieve if the Venezuelan government can't fix the country's labor problems.

The main issues

The primary problem for the roofing industry is that the heavy crude oil supplied by Venezuela accounts for a majority of the roofing asphalt used in the United States. As a result of Venezuela's labor crisis, no crude oil shipments have reached the United States in more than a month (as of mid-March), and the crude oil present in U.S. reserves is difficult and costly to convert to asphalt. Even if imports were to resume, the roofing industry would have to jockey for the fewer than 500,000 barrels of Venezuelan heavy crude oil per day that also likely will be needed by the paving industry. At its oil-production height, Venezuela was producing nearly 3 million barrels of crude oil per day. (One barrel equals 42 gallons [160 L].)

Of course, basic economics comes into play. As demand rises and supply plummets, prices predictably will increase. According to the American Petroleum Institute, crude oil prices were $36 per barrel in February—the highest they have been in more than two years.

What to do

Few in the oil or roofing industries believe the supply crunch will end soon, and fewer still offer any viable short-term solutions. For roofing contractors, the challenge is to protect yourselves from volatile price increases by inserting language in bid documents to account for unexpected price increases. NRCA recently issued a Special Report detailing some possible contractual language. Click here to access the report. In the meantime, keep NRCA and Professional Roofing informed about how oil and asphalt shortages are affecting your business. By sharing information, the industry can become better informed about the current situation.

Ambika Puniani is editor of Professional Roofing magazine and NRCA's director of communications.