3 Oil-Price Hike Impacts of the Russia-Ukraine War that Might Affect the Construction Industry

Fears of oil supply disruption drove up oil prices as Russia continues its invasion of Ukraine.

One of the immediate effects of the conflict in Ukraine was an increase in the price of petroleum products at the pump in the Philippines.

As the crossfire between Russia and Ukraine has intensified, worldwide oil prices are rising, and this has caused local oil costs to soar.

Experts believe that the recent increase in global oil prices would lead to significantly higher local pump prices.

As oil is so important to the construction industry, from manufacturing building materials to transportation and job site equipment operation, a price hike will have a range of impacts on construction project success.

Below are some areas that impacted the rising cost of oil and might affect the construction industry.

RELATED: 4 Construction-Related Areas Affected by the Russia-Ukraine War

1. Higher Housing Cost

The current conflict between Russia and Ukraine could impact housing prices in India. Real estate developers are concerned that escalating geopolitical tensions between Russia and Ukraine would put higher pressure on input costs.

While the price of key raw materials like cement and steel has been rising for several quarters, developers are concerned that the cost increase this time would have to be passed on to consumers.

Housing sales have been recovering in key property markets, owing to pandemic-driven awareness among homebuyers of the need for housing, record-low home loan interest rates, state government stamp duty reductions, and stable prices and incentives.

2. Higher Transportation Cost

Because of the pandemic’s impact on global transportation, a war might worsen these problems even further. Affected modes include maritime transportation and railway freight. Shippers are concerned about rising oil prices because of the conflict. Currently, freight costs are at an all-time high, but they could grow considerably more.

Because companies may pass on production costs to customers, an increase in this cost might alter the prices of a variety of goods and services.

RELATED: 1/3 Construction Industry Challenges by PCA: Rising Cost of Materials

3. Higher Cost of Construction Materials

Last year, the construction industry was already dealing with high prices for timber, steel, and plastics. Costs of energy-intensive building materials such as concrete, cement, and bricks will rise in response to rising gas prices, though at a slower rate.

While contractors do not use a lot of natural gas in the construction process, rising gas costs impact them. Metals, bricks, concrete, and cement suppliers are big users of natural gas.

For example, because heating is an important part of the manufacturing process, gas might easily account for one-third of the cost of a brick factory.

RELATED: 3/3 Construction Industry Challenges by PCA: Shortage in Skilled Workforce

A year-to-date change of P10.85 per liter for diesel, P9.55 per liter for kerosene, and P8.75 per liter for gasoline resulted from the war’s impact on world oil prices.

The Philippines government has stated that it will release P3 billion in subsidies to help ease the impact of the Russia-Ukraine conflict on the country’s economy as oil and agricultural commodities rise in price.

Photos from Freepik

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CITATIONS:

• The Quint. (2022, February 25). Five Essential Commodities That Will Be Hit by War in Ukraine. Retrieved March 2, 2022, from https://www.thequint.com/news/world/five-essential-commodities-ukraine-war-russia-ukraine-crisis#read-more
• Baclig, C. E. (2022, March 2). Putin’s war on Ukraine and impact on PH prices. Inquirer.Net. Retrieved March 2, 2022, from https://newsinfo.inquirer.net/1562204/putins-war-on-ukraine-and-impact-on-ph-prices
• Sante, M. (2021, October 12). Soaring gas prices will raise the cost of some building materials. THINK Economic and Financial Analysis. Retrieved March 2, 2022, from https://think.ing.com/articles/soaring-gas-prices-will-raise-the-cost-of-some-building-materials/