Industry Focus

A recent Fortune article listed the magazine's top 10 things that can go wrong with the U.S. economy. Although not all directly affect the roofing industry, some deserve a closer look.

The issues

Fortune has identified soaring crude oil prices as a major concern facing the U.S. economy. Crude oil prices rose 34 percent per barrel two months after the United States' war against terrorism began. In addition, Iraq has halted its oil exports, and other countries may follow. And Venezuela, currently one of the countries the United States depends most on for oil supplies, has been experiencing political upheavals that have affected its oil production.

Increasing wholesale per barrel prices can mean about $70 billion in tax increases, according to Fortune. Imagining how these increases might be passed to the roofing industry—asphalt roofing material prices will increase, as well as the obvious surge in gasoline prices—can cause anxiety to settle in relatively quickly.

The Russian oil market may offer an alternative. According to Fortune, Russian oil production has increased by more than 1 million barrels per day during the past two years and exports have increased, as well. In fact, the country boasts the most oil outside the Middle East. And one Russian company, Moscow-based Yukos, is offering its oil within a dollar of that offered by Saudi Arabian companies. Currently, about 15 percent of U.S. oil imports come from Saudi Arabia; Russia supplies only 0.77 percent of U.S. oil. These numbers could change, particularly as Russia emerges as having one of the more stable political climates among oil-supplying countries.

Of course, there are many other aspects affecting the U.S. economy and roofing industry. For example, many economists are concerned the U.S. economy is so unpredictable, it is teetering between deflation and inflation. Because consumer demand for many products is waning, some companies may end up with excess inventory, which would lead to deflation. On the other hand, international trade issues could contribute to inflation.

A conundrum

The roofing industry now finds itself in a bit of a pickle. Construction starts remain steady, which means there's work to be had. But passing on increases in materials prices, as well as wage increases for sought-after labor, always is difficult for consumers to absorb in a slow economy. To help address your clients' concerns about price increases, educate them about the situation. In addition, consider inserting contract clauses that state bid prices may increase reasonably should material costs rise.

To reach me, write 10255 W. Higgins Road, Suite 600, Rosemont, IL 60018-5607; telephone (847) 299-9070, Ext. 255; or e-mail apuniani@nrca.net.

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