Construction Costs Expected to Remain High Despite Plummeting Oil Prices

Despite the rapid decline in international oil prices following the signing of a memorandum of understanding (MOU) to end hostilities between the United States and Iran, the prevailing outlook is that construction costs will continue to rise for the time being.

This is due to the significant time lag between drops in oil prices and their reflection in construction material costs and overall project expenses, as well as the fact that once raw material prices have risen, they rarely return to previous levels.

According to the Korea National Oil Corporation today (June 21), the price of Dubai crude fell 25.0% from $97.41 per barrel on the 3rd of this month to $73.09 on the 18th.

During the same period, Brent crude prices fell by 18.4%, and West Texas Intermediate (WTI) dropped by 20.2%.

The construction industry hopes that the stabilization of oil prices will help ease the burden of production costs.

Oil prices affect not only fuel costs for construction equipment but also the prices of petrochemical-based construction materials such as asphalt, asphalt concrete, waterproofing materials, and paints.

With supply chain disruptions for crude oil and raw materials caused by the war in the Middle East, construction costs have maintained an upward trend throughout this year.

According to the Korea Institute of Civil Engineering and Building Technology, the construction cost index in April stood at 136.88, a 4.44% increase compared to the same month last year.

The index, which was 132.7 in December of last year, has risen steadily to 133.52 in January, 133.76 in February, 134.53 in March, and 136.88 in April of this year.
※ Please note: This article was translated by AI and may contain errors.