June 2002

The oil factor | Industry Focus

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The oil factor

by Ambika Puniani Bailey
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A recent Fortune article listed the magazine's top 10 things that can go wrong with the U.S. economy. Although not all directly affect the roofing industry, some deserve a closer look.

The issues

Fortune has identified soaring crude oil prices as a major concern facing the U.S. economy. Crude oil prices rose 34 percent per barrel two months after the United States' war against terrorism began. In addition, Iraq has halted its oil exports, and other countries may follow. And Venezuela, currently one of the countries the United States depends most on for oil supplies, has been experiencing political upheavals that have affected its oil production.

Increasing wholesale per barrel prices can mean about $70 billion in tax increases, according to Fortune. Imagining how these increases might be passed to the roofing industry—asphalt roofing material prices will increase, as well as the obvious surge in gasoline prices—can cause anxiety to settle in relatively quickly.

The Russian oil market may offer an alternative. According to Fortune, Russian oil production has increased by more than 1 million barrels per day during the past two years and exports have increased, as well. In fact, the country boasts the most oil outside the Middle East. And one Russian company, Moscow-based Yukos, is offering its oil within a dollar of that offered by Saudi Arabian companies. Currently, about 15 percent of U.S. oil imports come from Saudi Arabia; Russia supplies only 0.77 percent of U.S. oil. These numbers could change, particularly as Russia emerges as having one of the more stable political climates among...

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