Fuel price increases associated with the Middle East conflict began to affect construction project pricing in the first quarter of 2026. Tariffs also continued to increase the price of some construction materials, especially steel, aluminum, and copper. Despite these challenges, construction company backlogs grew and the fundamentals of the U.S. industrial real estate market improved at the start of 2026.
Fuel
Fuel prices have spiked as the military conflict in Iran has intensified since the end of February. The retail price for a gallon of No. 2 Diesel Ultra Low Sulfur (0-15 ppm) fuel in the Lower Atlantic region was $5.30 during the fourth week of April. The price of diesel is up 50% since the start of the year, and is approaching its post-2007 high of $5.76 per gallon (last seen in June 2022). Currently in Georgia, the average price for regular gasoline is $3.68 per gallon (up 30% since the start of the year) and the average price of diesel is $5.23 per gallon (up 45% since the start of the year).
Elevated fuel prices raise construction project costs in phases. First, the cost to operate heavy construction equipment (such as excavators, skid-steers, loaders, lulls, and cranes) immediately increases with diesel fuel prices. Next, the cost to transport construction materials (often multiple times, from a material’s extraction or manufacturing site, to its fabrication site, and ultimately to the project site) increases as fuel prices impact freight rates. For example, during the last week of March, a major manufacturer of masonry and other architectural products implemented a “supply chain surcharge” to offset “significant volatility in fuel markets.” Rising crude oil prices then raise the cost of petroleum-based products like asphalt (see below), which is a byproduct of petroleum refining. Finally, rising fuel costs impact the cost of: (1) energy intensive building materials (such as cement, structural steel, glass, and aluminum) whose manufacture requires a significant amount of heat or electricity; and (2) polymer-based construction materials (such as PVC piping and TPO roofing membrane) where petroleum is used as feedstock. For example, in addition to freight surcharges on all orders after April 1, 2026, commercial roofing manufacturer Carlisle announced material price increases effective April 13, 2026 on TPO roofing membrane and accessories (5-7%), EPDM roofing membrane and accessories (5-7%), PVC roofing membrane and accessories (5-7%), Polyiso insulation (5-7%), adhesives and primers (8-10%), and all other accessories (3-5%). Commercial roofing manufacturer Elevate (formerly Firestone) announced similar material price increases and surcharges, as well as an 8% increase on asphalt membrane and accessories. According to Carlisle, the material price increases are due to “rapid and substantial increases in crude oil and petrochemical feedstock costs.”
SOURCES: U.S. Energy Information Administration; Georgia Department of Transportation Fuel Price Index; Cumming Group, Market Analysis, Monthly Snapshot, March 2026; 3/16/2026 Letter from OldcastleAPG to Customers; 3/13/2026 Letter from Carlisle to Customers; 3/13/2026 Letter from Elevate to Customers
SOURCE: Georgia Department of Transportation Fuel Price Index