Category Archives: Oil Prices

Are the oil prices affecting the construction industry

The cost of heavy equipment depends a lot on the oil price which also has its impact in the construction industry. It is not necessary that if the oil prices are low, it will be a sunny day for the construction industry but ideally it always has a positive impact. The construction industry seems to make good profits when the oil prices are at its low primarily because the heavy equipment consume the same amount of fuel with limited costing to the company. We have seen that when the oil prices were high, it had a negative impact on the construction sector or in other words the construction industry were not able to afford to give any discounts to the end users.

When we relate construction industry with oil prices, we also have to consider few other dimensions and they are the ones that have a greater impact than the others. For instance, after excavating the land, the soil is supposed to be dumped at a distant location for which you need trucks. Now if the oil price is high, it will undoubtedly become expensive for the company to move the soil from one place to another. This will certainly have its impact on the industry as the construction companies will not want to incur losses by selling their products at a lower price. This was just an example. There are many other factors that are co-related with the oil prices that determines the fate of the construction domain.

There is also a flip side of fall in oil prices that can have a negative impact on the construction domain. Heavy equipment companies are in the process to manufacture equipment that consume less fuel. Now taking this new technology into consideration, we can construe that the equipment will be expensive and if the oil prices starts falling they are in no mood to product equipment that are less expensive but consumes more fuel. So the construction companies are left with no option other than to buy those expensive equipment. Other than that, we have seen that after a small correction in the oil price, it again starts rising. This means that the fall will be for a very limited time and the heavy equipment companies will not want to change their technology for a limited duration.

Fall in oil prices affect the construction industry in one more unique way. For instance, a construction company started a project when the oil prices were high but by the time it completed oil prices started falling. This actually is benefitting the companies who have started the project during the fall as they will be able to sell the product at a lower rate than the one who completed their project during the time when the oil prices were at its peak.

Other than that when the oil prices are high, it has the capability to make the entire industry sluggish. It is particularly during this time that the construction companies are not able to show huge profits. Nevertheless, fall in the oil price is mostly considered to have a positive impact on the construction industry.