Asphalt supply in a volatile world
The 2009 recipient of the Gerald Rohrbach Minnesota Pavement Conference Award is Mark Maloney (right), the public works director/ city engineer of Shoreview. Presenting the award is 2008 recipient Doug Schwartz.
With many transportation and road projects likely to receive funding from the recently passed stimulus package, many members of the industry are wondering, “What does the supply situation for asphalt binder look like for this year?”
“Good,” said Clint Rybak, of ConocoPhillips, as a part of his session at the 2009 Minnesota Pavement Conference. While Rybak said there might be localized shortage issues at times, the asphalt supply looks to be stable in the upcoming year.
Rybak discussed how the last few years have seen dramatic fluctuations in the price and supply of asphalt and additives such as polymers. Although oil prices have dropped, Rybak said the future of asphalt supply remains uncertain. He discussed the primary drivers of supply and price volatility of asphaltic products.
Asphalt base is derived from crude oil. Although the U.S. demand for oil has seemingly been down, Rybak said, the United States has not been a driver of the oil markets since 2004. “Developing nations are becoming more and more of an influence in global markets,” he explained.
The refining process also affects the supply of asphalt, as the refineries convert crude oil into the asphalt base. This base is one of the several possible products from crude oil, along with jet fuel, gasoline, and diesel fuel. Most often refiners focus on producing either fuels or asphalt, Rybak said. While the number of refiners is down in the United States, the production level is up in the refineries that are in operation. Today’s typical refinery is bigger and produces more than in past decades. Because gasoline margins have held up and pricing has been good, Rybak said the outlook is positive for the asphalt market. The higher asphalt prices are relative to crude, the more asphalt will be produced.
While numbers look different year to year, Rybak said there is “no reason to believe (asphalt supply) will be anything but … normal” this year. “As we go forward, the outlook will look different year to year,” he said, “but certainly there are plenty of refiners that have plans to give themselves the option of putting the bottom of the barrel in the highest valued market.”
—Holly Miller, LTAP intern