Earlier data showed a similar trend in March, when construction input prices jumped 2.2% in just one month, according to the Associated Builders and Contractors. “Construction materials prices surged in March and are now up 4.8% year over year, the largest annual increase since January 2023,” said ABC Chief Economist Anirban Basu, who cited rising oil prices tied to conflict in Iran and warned that continued energy volatility could further pressure costs across the industry.

According to AGC’s analysis of BLS data, diesel prices are up nearly 74 percent year-over-year, while key metals like aluminum and copper have surged by more than 20 to 35 percent – far outpacing the 3.6 percent increase in bid prices contractors can charge.

Energy Shock Drives Broad-Based Inflation

The spike isn’t just typical inflation – it’s being driven by a global energy supply shock, as oil supply disruptions tied to Middle East conflict have affected roughly 20 percent of global oil flows, especially through the critical Strait of Hormuz. Diesel prices, for example, surged well beyond forecasts, reaching over $5.30 per gallon in April (compared to $3.50 expected), and fueling a domino effect on manufacturing, freight, and equipment operation costs.

“A global energy supply shock is rippling through every layer of construction – from manufacturing to delivery to on-site operations,” said Macrina Wilkins, AGC’s director of market insights.

Metals and Tariffs Compound Volatility

Metals prices have soared as well, with aluminum up more than 37 percent and copper and brass climbing over 20 percent year-over-year. Steel prices are up 13 percent, and some estimates show steel and copper costs surging 15 – 35 percent and 25 – 50 percent, respectively, in extreme cases. Analysts say this volatility is no longer just a matter of supply and demand: ongoing tariffs and global supply chain realignment are creating structural instability.

“Metal price volatility is being driven not just by demand, but by ongoing tariff policy and global supply chain realignment,” Wilkins added.

Transportation: From Side Effect to Major Driver

Truck freight costs, once a secondary concern, have become a primary inflation driver. The producer price index for truck transportation of freight rose 8.1 percent in April and is up more than 15 percent year-over-year. Higher diesel costs have triggered new fuel surcharges, reduced trucking capacity, and pushed spot rates higher – costs that are quickly passed along to contractors and project owners.

“Transportation is now a key inflation driver – not just a side effect,” said one industry executive.

Margin Squeeze Threatens Contractor Viability

Perhaps the most troubling trend for the industry is the growing disconnect between rising costs and fixed-price contracts. While input costs spike, bid prices remain largely unchanged – putting contractors in a bind.

“This isn’t just inflation – it’s margin compression that threatens contractor viability,” said Jeffrey D. Shoaf, AGC’s chief executive officer. Analysts estimate that even a 20 percent increase in material costs can wipe out 50 – 70 percent of a project’s profit.

Doubts Over Gas Tax Holiday as a Solution

Some policymakers have proposed a federal gas tax holiday as a remedy, but industry groups are skeptical. Most analysts suggest such a move would save drivers less than $0.30 per week and, because the tax is applied upstream, consumers and contractors may see little direct relief. Meanwhile, suspending the gas tax would cut billions from infrastructure funding and weaken the Highway Trust Fund that supports critical road and bridge projects.

“A gas tax holiday offers minimal short-term relief while undermining the long-term funding that construction depends on,” Shoaf said.

Looking Ahead: More Turbulence Expected

Industry analysts warn that if current trends persist, rising costs could delay projects, reduce backlog conversion, and slow overall construction activity later in 2026. Ongoing risks include continued energy market volatility, tariff and trade policy uncertainty, persistent labor shortages, and fragile supply chain conditions.