Rising cost of oil leads to a sharp increase in asphalt projects

The rising price of crude oil has caused the price of almost everything people purchase to rise and Thursday evening Nevada's infrastructure committee had to decide what to recommend that the city do about the recent increase in the cost of the asphalt used in the city's street sales tax construction projects.

Blevins Asphalt, which submitted the low bid for Nevada's street construction this year, has informed the city that Sinclair Oil Company, Tulsa, Okla., has stopped supplying the asphalt oil used by contractors throughout the Midwest. Blevins is having to purchase asphalt oil from other suppliers at a higher price, which has caused them to raise their price by $26,260, to a total price of $315,424.54.

Unfortunately, Nevada has already prepared the streets for paving and about one third of the curb and guttering has been laid. If they do not complete the projects the roads will be mud all winter and the curb and guttering will be damaged by the winter weather.

"I've been in business for 30 years and this isn't right," Bob Coonrod, infrastructure committee member, said before the committee voted unanimously to recommend that the city attorney review the contract with Blevins Asphalt and make recommendations on how the city should proceed to negotiate the best price possible to finish the paving this fall.

John Haggans told the committee that the price of oil is $30 per barrel lower than it was when the contract with Blevins Asphalt was signed on June 16.

Coonrod told the committee that those prices are for light sweet crude, not the sour crude that asphalt is made from, which is a lower grade of crude oil.

The problem that Nevada faces is that it is at the bottom rung of the production ladder.

Sinclair Tulsa Refining Company produces and sells the oil that Sinclair Oil Company sells to Blevins Asphalt to make the product that is needed to surface the streets.

Sinclair Tulsa Refining Company has said in a letter to Sinclair Oil Company that because it is not economical to produce the oil melded to make asphalt, they will no longer make it. When the existing supply of asphalt is gone, they will not make any more unless all of the companies purchasing asphalt pay them more money.

Sinclair Tulsa Refining Company has this nifty clause in their contract with Sinclair Oil Company that according to a letter from Sinclair Oil to Blevins Asphalt says that "if for any reason SOC is unable to supply the asphalt you have ordered it has the right to allocate the available supply of asphalt in whatever manner it deems equitable. And that allocation could go down to as low as none if the asphalt supply is completely terminated, as is the case here".

"If we don't get anything done, in the long rung it will cost more than $26,000," Haggans said.

Coonrod told the board that he did not like this way of doing business, but he could see increasing the price by $10,000, but not $26,000.

Joe Charles, public works director told the board that the next lowest bid for the street construction was $330,000.

"Blevins new price is still $15,000 below the second lowest," Charles said.

Coonrod said that he thought Blevins should not be allowed to bid on this project again.

"Next year we can take this into consideration when we look at bids," Charles said.