Introduction
What do rising oil prices mean for construction?
Conflict in the Middle East has sent shockwaves through global energy markets. Oil prices jumped by more than 50% in just a few short weeks.
One third of global crude oil and 25% of seaborne oil trade passes through the Strait of Hormuz.¹ When a route of this scale comes under threat, the impact is quickly felt through energy markets, shipping costs and global supply chains. Even as a fragile deal is struck, the future remains uncertain. A return to normal shipping will take time and energy price volatility is likely to remain high for months to come.
For construction, the consequences of this shock to energy prices comes as markets adjust to years of uncertainty. Geopolitical tensions, shifting trade policies, energy market volatility, supply chain disruption and labour shortages have all added complexity and unpredictability. Our Construction Certainty Index showed that this is leading to a global crisis of confidence in construction delivery. The Index showed an industry grappling with systemic challenges and increasing exposure to forces beyond its direct control.
This isn’t just about the cost of fuel. Oil influences transportation, logistics and the production of key materials. Construction projects are planned and funded over years, but costs are moving quickly. Metals such as steel, aluminium and copper are especially sensitive because of the energy needed to produce them and their central role in construction.
As oil prices rise, the effects can be seen through the supply chain, pushing up costs and challenging delivery. The biggest impact will be on projects with high structural, mechanical and electrical requirements, including data centres, advanced manufacturing facilities and major infrastructure.
The new challenge will not be to respond to this single event, but to deliver projects in the face of deepening volatility. That needs a new approach: one built on a clear understanding of risk, better data, early planning and being able to adapt as conditions change.
Not every project will feel these effects in the same way.
This report combines analysis of previous energy shocks with real project data. We examine where costs are most likely to rise, which sectors and regions face the greatest risk, and what project leaders should do now to prepare.