July 22, 2008 at 12:16 pm #3521
Shortage hurts state asphalt industry
By The Associated Press July 21, 2008
OKLAHOMA CITY – Record oil prices are creating shortages of oil-based asphalt materials and dramatically driving up their price.
“We’ve done some scrambling,” said Bob Lemon, vice president of Haskell Lemon Construction Co., a provider of asphalt products in Oklahoma. “For an asphalt company, that’s not a good thing to run out of asphalt.” The company gets oil from local refineries and mixes it with rocks and sand to produce asphalt, which is provided to contractors and the Oklahoma Department of Transportation, among other clients.
Supplies began to tighten as the summer approached, said Lemon. Oil prices shot up to more than $100 a barrel and gasoline hovered around $4 a gallon. When the company’s main supplier, Valero Refining Co. in Ardmore, experienced a few equipment problems, even the slight decline in production had a significant effect.
“Maybe because that refinery has been pushed so hard for so long now,” said Lemon, adding that Valero has been producing a great deal of gasoline as well. At the same time, Gary-Williams Energy had a fire at its facility in Wynnewood. Other suppliers have had a difficult time getting their products shipped north from Houston due to temporary closures of portions of the Arkansas River.
“Last year when it was raining almost every day, we had tons of overflow,” said Lemon. “But now it’s a 180-degree reverse. We’re selling it as fast as we can make it.” ODOT Director Gary Ridley said the agency and its contractors are reeling from the dizzying climb in prices. Seven or eight years ago, ODOT was able to buy liquid asphalt for $125 a ton; today, the price has reached $650 a ton, said Ridley.
“With high demand and a high return on investment for all (oil) products, liquid asphalt is coming extremely expensive and extremely rare,” said Ridley. Refineries with limited oil resources may be more inclined to use the material they have to make products that generate a higher return on investment, he said, which leaves asphalt toward the bottom of the priority list.
“Some suppliers are just not able to find liquid asphalt,” said Ridley. Haskell Lemon is making good on all its commitments, said Lemon, even if it means juggling some schedules and buying materials from refineries in Memphis, New Orleans and Houston. The transportation costs make oil from out of state even more expensive, he said.
“But it’s ‘higher cost’ versus ‘none,'” said Lemon, adding that polymers are also in short supply. “Everything is still going to get done, even if it takes a bit longer than anticipated. A few jobs that are getting short on time have first dibs.”
July 22, 2008 at 12:17 pm #6702
Here is news article on problems of Asphalt industry in getting supplies & high cost asphalt has risen as result of demand shortages and high oil prices. As backdrop G-W Wynnewood Refinery supplies about 60% of states asphalt, Valero Ardmore about 25% and Sinclair Tulsa another 15%.
Making the problem worse – A number of previous asphalt suppliers like Sinclair Tulsa will be adding or expanding coking operations across the U.S. at a time when demand for asphalt has began to increase for the first time in decades. Here are just a few of asphalt producers expanding cokers or adding cokers:
BP Toledo, BP Whiting, Chevron Pascagoula, Citgo Corpus Christi, Valero Corpus Christi, ExxonMobil Joliet, COP/WRN Woodriver, Frontier Chyenne, CHS Laurel, Hunt Tuscaloosa, Marathon Catlettsburg, Marathon Detroit, Marathon Garyville, Shell Martinez, Sinclair Tulsa, Sinclair Rawlings, and Petrobras Houston.
I may have missed a few and several of these only provide small volumes as option versus coker production which may continue but you can see it that they will have big impact.
Additionally nearly all the remaining large asphalt producers are refineries that have 75-100 MBD capacity and have fairly simple to cracking complexities that become targets for next round of refinery closures or consolidation. A Large majority of the +150 refineries (nearly half US refineries) that were closed in U.S. during 1980-1996 time frame were less 60MBD simple refineries. <Note for some reason Oil & Gas Journal delisted topping/asphalt refineries from their WW Refining survey in ~2002 but many are still running – need look at EIA U.S. refining survey to see them.>
The high cost of crude oil and low product yield (i.e. makes lot fuel oil / asphalt instead of more gasoline/diesel) continues to put economic pressure on these types of refineries. Even complex refineries like Valero & several others have taken downtimes due to bad economics from Fund investors speculating on crude & driving prices $135/Bbl versus comparative lower fuel prices.
The U.S. transportation infrastructure is in critical need of repair and updating (nearly 22% of all U.S. bridges need to be replaced and are in danger of failures as seen in upper Midwest past several years) and most State Department of Transportation budgets are fixed based on taxes and do not have ability to absorb prices increasing by mutiples (~ asphalt at $180/t in 2004-05, $240/t 2005-06, $320/t 2006-07 and according this 2008 $650/t!). It also comes at time when the NAFTA trade has shifted about 300% increase truck traffic versus previous import ship deliveries of products (and this is before Bush’s Canada-US-Mexico NA Highway), which adds not only traffic but has also accelerated the damage to our highway systems. The US domestic trucks represent ~20% traffic but usually cause about 80% of the damage to US highways & road systems.
The flow-back from eliminating surplus & even some base asphalt production at a time when demand is actually increasing will mean that resid’s alternate market prices will hurt coker & complex refinery margins as well ….. so this isn’t a one sided effect.
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