Can Obama Afford His Infrastructure Program?

by: Bill Paul

On Saturday, President-elect Obama pledged the biggest road and bridge construction program since the 1950s. But has anyone in Washington asked Wilson County, Tennessee road superintendent Steve Armistead about the price of asphalt these days? For that matter, has anyone thought about how much more cement is likely to cost when that industry has to pass through costs associated with its carbon dioxide emissions?


Bottom line: the two most essential materials of an infrastructure rebuilding program – asphalt and cement – could be so expensive that Obama won’t be able to fix nearly as many roads, bridges and buildings as he wants to, and thus fewer jobs will be created.

Armistead told The Tennessean newspaper earlier this month that, notwithstanding crude oil’s precipitous price decline, in November the price of asphalt, which is made from crude, was more than double what it was last January. Rodney Carmichael, head of the Tennessee County Highways Officials Association, told the newspaper asphalt prices will remain high because, when crude prices shot up, oil refiners tweaked their equipment to refine more gasoline, leaving less feedstock available to make asphalt. “The newer technology has backfired,” Carmichael said.

Speaking of backfires, the Obama administration’s plan to force CO2-emitting manufacturers to have to pay for their emissions appears likely to cause cement prices to surge.

The cement industry is one of the world’s worst CO2 emitters. To exempt cement manufacturers from CO2 emissions reductions would make the entire program Obama wants to impose a joke. And yet, if Canada is any example, forcing cement manufacturers to have to pay extra to offset the CO2 emissions they generate could cause cement prices to skyrocket.

Facing a carbon tax, British Columbia cement manufacturers recently told government officials in Ottawa that such a tax would eliminate their profit margins for years to come. The officials made it sound as if, even if they raise prices, they may still have to cut back manufacturing.

Disclosure: no positions