Highly volatile oil prices are affecting how the town budgets and plans for road projects.
By
381-1676
Monday, October 20, 2008
BLACKSBURG
-- Crude oil prices don't only affect drivers at the gas pump.
They can determine the condition of the roads on which you drive.
Blacksburg Public Works Director Kelly Mattingly held his breath when bids
for asphalt went out recently.
When they came back in, he sputtered.
"We hoped for $65 a ton, budgeted for $75, and it came back at
$85," Mattingly said.
At $85 a ton, the price of the town's annual asphalt supply has about
doubled from $650,000 to $1.2 million.
To put that number in perspective, consider that the operating budget for
the town's parks and recreation department is $1.7 million.
The driver of these high costs? Petroleum, which is a major component of
asphalt.
Tied as it is to the global oil market, the cost of asphalt has become a
wildcard expense in already uncertain economic times.
That volatility coupled with a looming state budget shortfall could affect Blacksburg's road
maintenance program, for perhaps years to come.
Crude oil prices have dropped in recent days from over $100 a barrel to
about $70 this week. On July 11, it reached a record at $147.27 a barrel. Justin
Cook | The Roanoke
Times
Glen Cooper of R.J. Merkel pushes a machine used for
painting road lines up Jefferson
Street in Blacksburg.
Rising crude oil prices may affect the town's streets and roads.
If the town purchased asphalt today, the actual cost would be lower than
$1.2 million, Mattingly said.
In a few weeks, or even a few days, though, it could go higher than the
highest estimate. The world's leading oil producers meet next week to discuss
slashing production. That could limit supplies and force prices higher.
And therein lies the problem -- how to budget for an expense that can't be
reliably predicted.
There's no hope of help from the state, which is facing a $2.5 billion
shortfall that will almost certainly lead to a slashing of funding the town
receives from the Virignia Department of Transportation.
Over the past decade, state reimbursements for the town's street maintenance
have consistently fallen short of actual costs, even in good years.
In 2007, the town spent about $3 million to maintain streets. The state
reimbursed $2.5 million of that, leaving the town to cover the $500,000
shortfall. Asphalt accounted for $650,000 of last year's maintenance budget.
Next year, the choice may be to take money from some other town project or
service to pay for paving, or pave fewer roads, Town Manager Marc Verniel said.
But putting off maintence has a compounding effect. The longer a road goes
without maintenance, the more it will deteriorate, Mattingly said.
The more the streets deteriorate, the more costly fixing them becomes.
The town is working on a street paving plan that
officials are hopeful will keep up with needs, Verniel said.
