Effect of Diesel and Fuel Price Increment on Price Escalations on Road Construction

For four consecutive years, diesel fuel prices have increased dramatically. For example, between May 2005 and May 2006, diesel fuel prices rose approximately 40%. Such price increases put strong and direct pressure on the cost of running equipment and delivering construction materials (Gallagher and Riggs, 2006). As discussed before in road construction, involvement of fuel is relatively high. And according to the statement and Gallagher and Riggs (2006), unexpected price increments in fuel price badly effect on cost escalations. It proves that fuel price increments effects on the escalation of road projects at considerable level.


In addition, increased crude oil prices translate into higher costs for most petroleum based products. For example, between May 2005 and May 2006, petroleum-based plastic construction products increased in price by 18%, and asphalt paving prices increased 30%. In addition, as many domestic refineries have been switching over to lighter crude and the production of low-sulphur diesel fuels, the quantities of available asphalt, a by-product in the refinery process has decreased (Sullivan, 2007).

Sullivan (2007) has stated that fuel price increments directly cause to increase the price of asphalt. Asphalt is a main input used in road construction. Averagely 15% of cost of material input has been the asphalt. Above statement further justifies that fuel and diesel price has a strong relationship with cost escalations of road projects. Unexpected escalation of cost has been creating several issues within the road construction industry.