Oil price fluctuations affecting the building construction industry in Singapore

Abstract

Oil prices are very volatile. As oil is a fundamental element in human activities, its price fluctuations affect many industries, including the building construction industry (B.C.I.) in Singapore. As such, it would be beneficial to study the impacts of oil price hike on the B.C.I. During the months of high oil prices in 2008, the B.C.I. in Singapore did not do much to adapt to the price hike. The increase in oil price was absorbed and/or transferred from one player to another, and has resulted in higher construction costs. The first objective of this research is to identify the oil price trend in the B.C.I. in Singapore and the oil price hike impacts on construction processes. The second objective is to study the effects of oil price hike on structural steel and reinforced concrete construction, and also on underground and aboveground construction in Singapore. The third objective is to identify the strategies in order to cope with future oil price hike. In the attempt to study the topic, a preliminary survey was conducted and ten interviews with experienced industry players were carried out. It is hypothesized that oil price fluctuations bring greater impacts to steel structure than reinforced concrete structure, and to buildings with basement than those without basement. This was supported by the survey results and the interviews responses. Unfortunately, the quantitative data was not available and that limits the strength of the findings. Nonetheless, despite the oil price hike, construction companies should be motivated to find ways to optimize the construction costs so as to achieve higher profit margins and to increase their resilience in harsh times.