Skyrocketing diesel prices are reverberating through the construction industry, leading contractors and subcontractors to boost their bids as well as project cost increases.

“It’s significant,” said Mike Salsgiver, CEO of the Associated General Contractors‘ Oregon-Columbia chapter. “(Diesel) prices have effectively doubled or more since March. So, it hits the economy overall and the industry badly.”

For contractors and subcontractors, the costs are unavoidable. Diesel runs nearly everything on a typical jobsite, from backhoes and excavators to dump trucks and cranes. Diesel also powers the cargo ships, trains and trucks that bring building materials to a site.

Diesel fuel in Oregon averaged $6.04 per gallon at retail on Tuesday, according to AAA‘s Fuel Gauge Report. That’s up 46.5 percent from a year ago, when prices hovered close to $4 a gallon. Retail prices have dropped recently, down about 21 cents per gallon in the past month.

There’s little that contractors can do to avoid paying higher diesel costs, Salsgiver said.

“The work is the work,” he said. “We’re always making strides on making equipment more efficient, but (for avoiding costs), the immediate answer is not really.”

Project owners are noticing the effects. In April, the Oregon Department of Transportation paid contractors about 1 percent more than expected if fuel prices had remained unchanged.

ODOT uses a “fuel escalation/de-escalation” clause in its contracts. Contractors do not have to build in extra costs to cover fuel price increases after they submit a bid. Instead, ODOT adjusts payments after a project begins construction based on a monthly fuel price index.

“We expect prices to change, and our contracts make allowances for price fluctuations,” ODOT spokeswoman Katherine Benenati stated in an email message.

ODOT paid $4.66 per gallon in May, up from $2.51 a year earlier — a nearly 86 percent increase.

If prices remain high, the situation could eat into project budgets for major multibillion-dollar projects such as the Interstate 5 Rose Quarter Improvement Project, and the efforts to replace the Interstate and Burnside bridges.

Diesel price spikes are likely to hit large road and infrastructure projects the hardest, said Macrina Wilkins, director of market insights for AGC of America. That’s because diesel is used in the manufacturing processes for road materials, in addition to the work itself.

So far, AGC is tracking a modest escalation in costs.

“What we’re seeing is a slight uptick in the price of a bid or project,” she said.

Energy prices grew 10.1 percent in March and 7.8 percent in April, according to the Bureau of Labor Statistics‘ Producer Price Index.

“I would expect — as with any supply shock — you might see it begin to trickle into other areas,” Wilkins said.

Adding to contractors’ caution is the uncertainty of the United States’ ongoing conflict with Iran, industry officials said. It’s not clear when oil will resume flowing through the Strait of Hormuz at normal rates.

Salsgiver said he expects this price spike to endure longer than the 2022 disruption caused by Russia’s invasion of Ukraine.

“This one is dragging out a lot longer,” he said. “Certainly, as long as the situation in Iran is what it is, it’s going to last a while.”

Salsgiver added, “I’m not an economist, but I talk to economists, and they do not see an early end to this price spike.”

Contractors have so far largely taken the increased costs in stride. Dan Drinkward, vice president at Hoffman Construction, said the effects are hard to discern by general contractors. Subcontractors may notice the price spike first, he said.

“I would expect it to be a driver of escalation,” Drinkward said, adding that it’s only one component of increased costs across the industry. “For the most part, it’s a second-degree driver of escalation.”

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Five filtration systems and 10 stormwater treatment facilities are in the works in Northwest Portland.

The Oregon Department of Transportation (ODOT) infrastructure projects are intended to clean stormwater runoff from the Fremont Bridge, the St. Johns Bridge and elsewhere along U.S. Route 30.

“These new systems will connect into our current stormwater pipes to remove large debris such as trash and pollutants such as metals and oil from the water,” ODOT spokesperson David House stated in an email.

ODOT’s estimated total cost for design and construction is $37 million.

The five filtration systems will be next to the bridges, and the 10 stormwater treatment facilities will be along U.S. 30. All will collect stormwater from roadways and filter it before releasing it to the Willamette River between Sauvie Island and downtown Portland. Most sites are underground and will not be visible from roads and sidewalks, House stated.

“Rain from roads and other hard surfaces picks up trash, metals such as copper and lead, oil and other pollutants,” House stated. “When untreated, these pollutants wash into drains and nearby waterways diminishing water quality and habitat. Each filtration system we build will improve water quality in the Willamette River by removing large debris like trash and smaller pollutants like metals and oil before they reach the river.”

Project sites will include: the St. Johns Bridge, with two underground filtration systems (one beneath North Philadelphia Avenue on the east end and one beneath Northwest Knappton-General Road on the west end); the Fremont Bridge, with an aboveground filtration system at the base on the east end as well as an underground filtration system beneath the landscaping at the base on the west end; near the Willamette Greenway trail; and at the Fremont Bridge west ramps (at 1500 N.W. Raleigh St.), with an underground stormwater treatment system that includes a 12-foot-tall prefabricated control room and an approximately 20-foot-tall storage tank. Also, the underground treatment systems along U.S. 30 will be built in the highway shoulder between Northwest Nicolai Street and Northwest Marina Way.

WSP has produced project design and specifications for ODOT, according to House. That will allow flexibility in specific site solutions, which will be produced by the contractor for required reviews ahead of construction, he stated.

Bidding for a general contractor opened on Monday. ODOT expects to select a contractor by this spring, House stated.

Construction is expected to begin sometime this year and require approximately two years to complete.

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