Asphalt shortage hampers road work across U.S.

SEATTLE — Expect a bumpier drive. An asphalt shortage is delaying road maintenance projects in communities nationwide.

Asphalt is becoming scarce as U.S. oil refiners overhaul their equipment to maximize output of highly profitable fuels such as diesel and gasoline, using inexpensive — and hard to process — crude oil.

To make things worse, refiners are also cutting back on the production of a petrochemical that many states mix into asphalt to make roads more durable.

Dozens of road repairs were delayed last summer and municipalities around the country may face another shortfall next summer. Road maintenance projects that have gone forward cost significantly more as the price of asphalt nearly tripled over the past year.

The dearth of asphalt compounds the challenges states, counties and cities already face in fixing bridges, highways, local streets and other critical infrastructure at a time when budgets are squeezed by falling tax revenues and higher costs for fuel, steel and other raw materials.

“It strains an already strained budget,” said Jim McMinimee, director of project development for the Utah Department of Transportation.

Municipalities in Washington state, Alaska, New York, Colorado, Oklahoma, Idaho, Wyoming, Arizona, Nevada and Utah blamed road work delays on asphalt shortages.

In the past, about 40 percent of an oil barrel would be turned into asphalt products and now it’s around 10 percent, McMinimee said.

Some states have responded to the problem by reducing the amount of asphalt required to be poured on a street. Others have changed the chemical requirements of the asphalt they use.

Usually, these methods lead to a shorter life span for the roads, said Ben Teplitz, an asphalt expert for Platts, a trade publication.

Other municipalities are taking a second look at concrete, which for years was more expensive.

The U.S. is currently undersupplied by about 24,000 barrels of asphalt a day, or 5 percent of daily demand, and that number is expected to jump to 257,000 barrels a day by 2012, according to San Antonio-based NuStar Energy LP, a producer of asphalt.

On average, about 5,500 barrels of liquid asphalt are needed per mile of paving, said Adan Carrillo, spokesman for the Utah Department of Transportation.

Teplitz said he couldn’t quantify the shortfall of asphalt, but that the entire industry foresees less asphalt availability.

The shift in refinery technology that led to the decline in asphalt production was spurred by increased oil prices.

Oil refineries around the country are installing billion-dollar machines called cokers that are able to refine the chunkiest, low-grade and least expensive crude oil into highly profitable gasoline and diesel.

Contributing to the woes of those in need of asphalt is the lack of a petrochemical that is used to mix asphalt. Colorado’s road-maintenance delays, for example, were directly related to the dearth of styrene-butadiene-styrene polymer.

“The consequence of using less polymer asphalt is that roads won’t last as long. That is, durability is being sacrificed for affordability and getting the job done,” said Teplitz.

“The installation of cokers is pretty much a permanent change for refiners,” said Ken Simonson, an economist for the Associated General Contractors of America. “More of them are likely to be out of the asphalt business and that will keep up the pressure on asphalt for some time.”

Big companies that run a number of refineries around country have installed the cokers, including Tesoro Corp., Valero Energy Corp. and Marathon Oil Corp.

At the beginning of the year, a ton of asphalt — or 5.5 barrels — was selling for about $300. At one point the price rose above $800 per ton, said NuStar vice president Mike Stone.

In Washington state, at least three counties have announced project delays. In Seattle, one local asphalt supplier was directly affected by the cutbacks at refineries, and that left two counties short of asphalt.

More cokers are scheduled to come online between 2010 and 2011, likely magnifying the asphalt shortage, said Greg Matula, a NuStar Energy spokesman. The company estimates that the nation needs about 500,000 barrels daily to keep demand.

NuStar, though, is banking on increasingly thin supplies of asphalt, and it has bought asphalt refineries in New Jersey and Georgia to benefit.

The skyrocketing price of asphalt has had at least one positive effect — on the concrete industry, as its product becomes more attractive to city engineers.

But John Arroyo, executive director of Northwest Cement Producers Group, said it will take another eight to 12 months to know if the concrete industry will get more contracts, and that a broader economic slowdown will make an impact as well — not just asphalt prices.

“There’s been so much more awareness among public work staff because of high oil prices this year, just now they’re starting to look elsewhere and look at other options,” Arroyo said.