[yesplease]

I'm curious about this and was wondering if anyone had validation of the claims that oil's higher prices will prevent infrastructure upkeep/construction compared to what was built with "cheap" oil? Clearly certain uses such as asphalt will change but it looks like concrete for roads is increasing proportionally. I suppose plastic production would hurt the most unless bioplastics step up as feedstock prices rise, but what else would get hit hard by oil price increases? Building materials? Steel? Something else? As reasonable claims are encouraged.

[vtsnowedin]

Actually I think that high oil prices will provide the money for proper up keep of the oil infrastructure where low prices tend to force producers to curtail maintenance and spend the equity in the system.
Asphalt is an interesting sidebar. It is in fact the waste product residue from the refineing process. They are glad to sell it for the same price as gas but if there was no market for it they would have to pay to dispose of it. Other than paveing and roofing there is very little use for asphalt and a certain amount comes from each barrel of crude whether you want it or not. Concrete roads using cement produced with energy other than oil are a good alternative to asphalt paved roads but they are harder to repair as they require at least two weeks cureing time while asphalt pavement can be opened to traffic as soon as it is rolled and cools down below 180 deg.f (I have spent some time with paving crews.) You would not for example be able to close a lane at night to resurface it and have it available for morning rush hour. There are some latex modified concretes that can be used in four hours but they are very expensive and difficult to work with. At some point post cliff agenceys building and maintaining roads will switch to concrete and concretes inplace price will determine the value of the substitute asphalt but by then we will be maintaining a lot less road system then we are now.

[patience]

Steel is so common that it is being largely ignored, except for thefts arising from the current high price of scrap. This may be explained by the fact that, like oil, few people realize how pervasively important metals, and steel in particular, are to our infrastructure and daily needs.

Last January (?) I think it was, I read about a flooding river overflowing into a huge iron mine in Australia. (Hopefully, some of our Aussie friends on here will clue me in.) The result was a 50% price rise in iron ore. Oddly, US Steel stock went UP on the news, due to the fact that while the international price of steel rose immediately, US Steel has their own North American supplies which were unaffected, yet they could raise steel prices in line with the rest of the world, increasing their profitability.The effect on every business that uses steel, and the consumer was significant.

Since coal is required to make steel, and coal is used to generate a lot of electricity, and in turn, electricity is used to refine aluminum and to make high grades of tool steel, a cascade effect of rising prices and short supplies is probable in an energy-short future, where electricity will probably also be in greater demand to replace oil for home heating and other uses. Pull out the oil peg, and it all gets scarce and expensive.

Infrastructure is built of steel and cast iron, concrete (natural gas fired mfrg.), and petrochemicals to make paint, adhesives, etc.. All of it is transported to point of use by diesel fuel. This has resulted in much higher point-of-use costs for asphalt, raising from $1,200 to $1,600/tandem truckload last year up to $2,500/ load this year. This is Indiana's cost for rebuilding the road in front of my house, a project that has been going on for over 3 years now.

Kentucky has announced that their road projects will be greatly curtailed this year, and Indiana has both deferred and cancelled some projects, as lower tax revenues from lower gas sales (road fund tax) and lower income tax from recession squeeze the budget against higher construction costs.

[ROCKMAN]

Very interesting patience. The Aussie mine flood may explain what we've seen in casing prices from USS this year. By mid year we hit our price projection for year end. One story for the increase was due to USS increasing sales to overseas customers. The Aussie shu in would explain why the internation market could suddenly start out bidding us. For quit a while the deal from the mills has been the same: order your pipe but we won't give you a price. When the pipe is ready for delivery they'll tell us the cost. We can close the purchase or walk away. So far no one is walking away.

[emersonbiggins]

Anecdotally, at least one Texas county is substituting crushed red granite for asphalt in its road maintenance program.

Commissioners are optimistic red granite will be a useful alternative.

"You can't even get the oil, but when you can get it, it's $50,000 a mile. I can do this for about $10,000, and it's the next best thing," Grayson County Commissioner Jackie Crisp said

[burtonridr]

Infrastructure is built of steel and cast iron, concrete (natural gas fired mfrg.), and petrochemicals to make paint, adhesives, etc.. All of it is transported to point of use by diesel fuel. This has resulted in much higher point-of-use costs for asphalt, raising from $1,200 to $1,600/tandem truckload last year up to $2,500/ load this year.

+1

PVC pipes are used for road drainage systems and water and electrical conduit, copper wire for lighting, fiber optic cables for communications, steel reinforcement for concrete structures, etc.

polyvinyl chloride(PVC) is an oil biproduct, lots of this stuff is used under road ways for drainage, water, and electrical conduit. Then it must be transported to the work site by desiel powered trucks, planes, tranes, boats, etc.

Patience pretty well explained the metal process.

It all comes back to EVERYTHING uses oil in our society, which is why PO is such a big deal. You cannot eat or take a dump in a toilet without consuming oil in our country! Its freakin nuts!

[vtsnowedin]

Anecdotally, at least one Texas county is substituting crushed red granite for asphalt in its road maintenance program.

In New England interstate highways have four feet of sand gravel and crushed rock base courses on a shaped and drained bed topped with usually eight inches of asphalt pavement. Texas not having as much freeze thaw and moisture problems uses a lot less base and has used just thick pavements on some subgrades.
A crushed granite surface will work but it will have to be graded regularly and it will be dusty. If prices drop in the future the granite will make an excellent base to pave over.
If they mix that granite 50/ 50 with ground up old pavement they will have a very good road without the dust problem but it will take a cat 16 to grade it.

[emersonbiggins]

Interesting, vt. Would the cost of the old asphalt be prohibitive, or does it only become that way when fresh oil is added into the mix?

[vtsnowedin]

Interesting, vt. Would the cost of the old asphalt be prohibitive, or does it only become that way when fresh oil is added into the mix?

My prices are a year out of date but adjusting for todays fuel costs etc. you can get it ground off the road and loaded in the truck for about $11/ton. Or you can grind up the old pavement in place then spread three inches of stone (any hard stone will do not just granite) on top of the loose reclaimed and mix it in with another pass of the reclaimer. About $2.00/square yard plus what ever pavement you top it with if any. If you havn't seen a recaimer think rear tine rototiler scaled up to a 550 HP cat engine.
Hot top plants routinely mix in up to 35% ground up old pavement in their mixes to save on the liquid asphalt cement they have to add to the mix. They have to superheat the new rocks to transfer the heat to the old pavement(RAP) as applying heat directly to the RAP causes polution problems. Depending on the size of the stone hot top mixes are about 5.5% AC by weight with the finer mixes taking more than coarser ones. If you can get 1.5% from the RAP you can save quite a bit of money But it has already been out in the road for twenty plus years and has dried out and become brittle and chosing the right grade of AC and modifiers to get as good as virgin AC is an art still being developed.

[emersonbiggins]

Very thorough explanation, vt, thanks. If necessity is indeed the mother of invention, I guess I'll be keeping an eye out for press releases on innovative ways developed to pave roads besides using straight oil & asphalt.

[yesplease]

High costs don't translate into preventing infrastructure upkeep/expansion in any meaningful way AFAIK. They may delay it, and discourage expansion, especially frivolous uses, but that certainly isn't the same as preventing it. Looking at steel for instance, according to data it requires around 1% of oil production, and arguably most of that is for frivolous use, so that wouldn't be a problem unless we absolutely sat on our hands as oil production dropped to nothing.

Something else to consider is that less oil production would not strictly translate into a energy-short future, especially in terms of industry uses, unless we again decided to sit on our hands while supply dropped to nothing. Specifically speaking US steel increased prices because as a dense easily shipped commodity they're on the world market just like oil is. Granted, shipping costs need be accounted for, so odds are US steel didn't rise quite as much as other sources relative to booming demand from China, but it's not like there's no link. If they don't increase prices like the rest of the world does they'll be bought out, less the cost of transportation, by groups looking for cheaper steel.

Similarly, if we decrease the amount of oil relative to demand, it'll increase prices of other commodities relative to their exposure, but that doesn't translate into no upkeep/new infrastructure, just less upkeep/new infrastructure, especially what's frivolous, such as more asphalt for roads to nowhere or more steel for large trucks (used as grocery getters naturally) instead of subcompact cars. I suppose transportation being the largest user would be where breakdowns would be noticed first, but that requires a relatively small percentage of oil and we would need to be decades into depletion while doing nothing to cut into that. Chemical feedstocks are needed for many things, and like oil production has subsidized current use it looks like the proposed Hydrogen economy has the same goal. Cheaper chemical building blocks financed by encouraging conspicuous consumption on the consumer end as opposed to seeking applications that are both energy and money efficient so to speak.

[vtsnowedin]

High costs don't translate into preventing infrastructure upkeep/expansion in any meaningful way AFAIK. They may delay it, and discourage expansion, especially frivolous uses, but that certainly isn't the same as preventing it. .

Unfortunatly the US government has let our infrastructure decline and the decline started well before the supply of oil became tight. Not sense 1975 has work been done in a timely manner so now we have a backlog that is gargantuan. Instead they have built Big Digs and bike paths and blasted new wetlands out of solid ledge.

[VMarcHart]

I'm curious about this and was wondering if anyone had validation of the claims that oil's higher prices will prevent infrastructure upkeep/construction compared to what was built with "cheap" oil?

O&M is very labor intensive, which is sensitive to oil prices.

[yesplease]

Unfortunatly the US government has let our infrastructure decline and the decline started well before the supply of oil became tight. Not sense 1975 has work been done in a timely manner so now we have a backlog that is gargantuan. Instead they have built Big Digs and bike paths and blasted new wetlands out of solid ledge.

It's not like we don't have the half a trillion needed to bring infrastructure up to a "good condition". If we wanna throw away a few trillion in a ME desert, then complain about poor infrastructure, we reap what we sow.

[yesplease]

O&M is very labor intensive, which is sensitive to oil prices.

What specifically did you have in mind?

[VMarcHart]

O&M is very labor intensive, which is sensitive to oil prices.

What specifically did you have in mind?

In my industry, 99% of O&M is done from, via, through, by means of, with the help of, etc, mechanized, oil-driven machines. We have already seen O&M costs going up on the account of gasoline and diesel prices.

[yesplease]

O&M is very labor intensive, which is sensitive to oil prices.

What specifically did you have in mind?

In my industry, 99% of O&M is done from, via, through, by means of, with the help of, etc, mechanized, oil-driven machines. We have already seen O&M costs going up on the account of gasoline and diesel prices.

But how much have that gone up in relation to other costs, which are naturally compared to alternatives? I mean, an increase in service costs isn't the same as a prevention of service.

[VMarcHart]

...how much have that gone up in relation to other costs...? I mean, an increase in service costs isn't the same as a prevention of service.

I can't quantify yet, but things such as the cost of renting a crane went up a lot, etc. All service and maintenance work have been performed per schedule, but theses new costs were not computed in the cost of power sales, which is starting to affect the bottom-line.

[yesplease]

Those are gonna have to creep up too. I'm surprised more businesses don't use a dynamic system for cost projections...

[VMarcHart]

Those are gonna have to creep up too. I'm surprised more businesses don't use a dynamic system for cost projections...

Some do. It's called Variable O&M pass-through. However, if you're a buyer, you want for the seller to bear some of the risks too, so you don't agree on a 100% pass-through. Ultimately, it is always passed-through to the final/retail customer.