Concrete: A Real Kick in the Asphalt

Are rising oil prices all bad? Well, they certainly increase the price of many things. We have already seen car companies take huge hits because of the increasing scarcity of oil. But this effect isn’t uniform across all industries. For example, the concrete industry is booming. One of the executives at J.M. Marschuetz Construction Co. tells us why:

“Who would have thought in a million years that concrete would cost less than asphalt?” asked Jason Marschuetz, the company’s vice president. “The oil prices are ultimately helping us because even though we’re getting hammered once — for diesel — the asphalt companies are getting hammered twice — for diesel and asphalt.”

Concrete and asphalt are substitutes for a variety of applications, including paving roads and driveways. When oil prices rise, concrete gets a little bit more expensive while asphalt gets much more expensive. The result? People use concrete instead of asphalt whenever they can. We should see this trend across the economy — goods and services which are relatively less dependent on oil should become cheaper relative to the oil-guzzling competition.

This is just one of the many ways in which we are less dependent on oil than one might think. Oil may be the cheapest alternative for a variety of applications at $130 a barrel, but if the price increases much, there are numerous ways to achieve the same ends that use less oil. In econo-speak, the demand for oil is more elastic than it appears.

Finally, keep in mind that all the people in the concrete industry see their incomes rise during the oil-induced boom. New jobs are created in the industry as well, because new plants are coming online — such as the plant in Ste. Genevieve. Chrysler workers may be out of a job because of rising oil prices, but new opportunities are opening up because of the same cause.