Asphalt is a hot commodity

Summer 2006, and perhaps another reason to choose the road less traveled: fewer potholes.

Asphalt today is in what concrete was last year, and steel before that: very, very short supply. In a hot economy in the midst of a feverish development season, construction companies, pavers, state transportation officials and homebuilders are feeling the squeeze. Consequently, motorists and homebuyers are, too.

"I just came from a meeting at Daybreak, and the gist of the conversation was asphalt," said David Irwin, spokesman for Utah-based Hamlet Homes. Hamlet is building its Eastlake Village development at Daybreak, a master-planned community in South Jordan.

"Asphalt is becoming almost as expensive as concrete, and that cost, as well as other homebuilding costs, are going into increasing the overall price of homes," Irwin said.

The lack of asphalt made its way into Ivory Homes' president Clark Ivory's remarks as the company celebrated the completion of its 10,000th home earlier this month. Days later, it moved front and center at the Utah Legislature, when Utah Department of Transportation's director of project development, Jim McMinimee, told lawmakers that cost increases and product shortages have forced UDOT to prioritize some projects and delay others. Similar conversations are taking place at builders' meetings, job sites and board rooms across the state and the country.

The explanation of why the price of asphalt has spiked this year reads a bit like a paving "perfect storm," according to one of the state's largest suppliers, Salt Lake-based Sinclair Oil. Locally, the strong economy has spurred growth, which affects development and demand, while at the same time supply has

decreased because refineries — Sinclair among them — are upgrading their facilities to comply with new U.S. Environmental Protection Agency regulations regarding the sulphur content of petroleum products. The average cost to make the required refinery upgrades is between $200 million and $400 million, according to Craig Menees, general manager of refinery sales for Sinclair.

Also this year, weather affected asphalt production at a key plant in Wyoming, at about the same time another major regional asphalt supplier significantly slowed production while it conducted maintenance on its plant.

"All of that translated into a situation in which overall inventories coming into the season were very low relative to years past," Menees said. "You have to have enough in the tank, so to speak, to allow you to meet peak demand. You can't produce enough on a daily basis to do that.