Crude Oil Production Cut and Prices on the Rise

Crude oil production has a long-term effect on roofing in ways that are not always transparent.   

Oil production can affect transportation costs, material costs for asphalt-based products and overall profitability of roofing projects.  In talking to Bud Polston, EVP of Sales and Marketing for United Asphalts, he shared, “Last Sunday's surprise announcement that OPEC will widen crude oil production cuts to 3.66 million barrels per day has already pushed crude prices up by $5 per barrel.  These cuts will start in May and last through the end of the year, carrying with them potential global pricing effects.” 

According to CNN Business, “The cuts will start in May and last through the end of the year, as stated by an official with the Saudi Ministry of Energy according to Saudi state-run news agency SPA.  The reductions are on top of those announced by OPEC+ in October.  That month, oil producers agreed to slash output by 2 million barrels a day, the largest cut since the start of the pandemic and equivalent to about 2% of global oil demand.  Saudi Arabia now says it will cut oil production by another half a million barrels a day.” 

“And with summer right around the corner, consumer demand for gasoline and other petroleum-based products is certain to rise,” continued Polston.  “These rising oil prices could bolster inflation, adding pricing pressure for raw materials and freight costs to manufacturers across sectors of the roofing industry.” 

“While it is hard to know definitively the future net effect of these factors on asphaltic building material prices, the writing appears to be on the wall,” concluded Polston.  “We are committed to keeping the roofing market informed of the trends and in front of potential increases.”