Construction Input Costs Rose 18% Annualized in Q1 as Oil Prices Surge
According to Construction Dive, construction input prices climbed 2.2% month over month in March, with nonresidential inputs rising 2.3%, driven largely by a sharp spike in crude petroleum prices.
Market Impact
The surge traces back to geopolitical tensions tied to the conflict in Iran, according to Anirban Basu, chief economist at Associated Builders and Contractors (ABC). Crude petroleum jumped 20.2% month over month in March, putting upward pressure on “virtually every construction material,” Basu said. On a year-over-year basis, construction materials prices are now up 4.8%, the largest annual gain since January 2023. At an annualized rate for the first three months of 2026, input prices rose 18%.
Diesel prices took an especially severe hit. According to an analysis by the Associated General Contractors of America (AGC), diesel surged 37.8% from February to March, the largest single-month increase since the Gulf War in 1990. AGC chief economist Ken Simonson noted that those figures only capture prices through mid-March, and costs have continued climbing since. “The destruction of aluminum facilities and blockage of ship movements due to the Middle East war is driving costs still higher,” Simonson said.
Contractors are already reporting rapidly increasing fuel surcharges on material and equipment deliveries to jobsites, on top of the direct fuel costs for their own trucks and equipment. AGC CEO Jeffrey Shoaf warned that “extreme, sudden jumps are causing major hardship” because contractors can rarely pass along cost increases after committing to a project. Shoaf also flagged the risk that owner uncertainty could lead to project delays or cancellations.
What It Means for Subcontractors
- Fixed-price contracts signed before March are increasingly exposed. With input costs running at an 18% annualized rate, subcontractors should review contract terms now and pursue renegotiation or change-order conversations before losses deepen.
- Fuel surcharges are hitting jobsite deliveries directly. Budget for escalating surcharges on every material and equipment delivery, not just your own fleet fuel costs.
- Diesel prices may not have peaked. Simonson explicitly noted that prices continued rising after mid-March, meaning the March data understates the current exposure.
- Watch for owner-side project delays. Shoaf cautioned that cost uncertainty may push owners to pause or cancel planned work, which could affect your near-term backlog and scheduling.
- Consider escalation clauses on any new bids. The current volatility makes fixed-price bidding especially risky. Including material and fuel escalation language protects your margins if conditions worsen through Q2.
