Crude-oil prices also have been declining, and Martin predicts asphalt paving costs will erode over the second half of this year. The average price of West Texas intermediate crude fell 2.7% in April and another 8.3% in May, leaving prices at $94.70 per barrel. That price is 6.5% below a year ago. By comparison, the price for natural gas fell for 10 consecutive months before a modest rebound in May. Natural-gas prices are still 44% below May 2011's level, according to the benchmark "Henry Hub" price.
Natural-gas prices bottomed out at $1.95 per million Btu last April before bouncing back to $2.43 last month. This is far below the peaks of around $13 set in both 2007 and 2008.
"We think the current price level is unsustainable," says Mary Barcella, director of North American natural gas for IHS CERA, Washington, D.C. "The current prices are responding to a glutted market that has inventories at record levels." A "balanced market" will return prices to about $4, she says. That increase would still be less than half of the previous long-term average. It will take 10 to 20 years of growing demand to create enough pressure to move prices off the $4 equilibrium, she adds.
"The new technology is going to keep prices from bouncing back like they did in the past," says Barcella. "It will take several years to work off today's excess inventory."