E-commerce service providers agreed with Klines conclusion that lubricant companies have taken to online trading much more slowly than some other industries – and more slowly than expected a few years ago.

We saw an initial burst of activity three years ago, said Doug Haugh, vice president of marketing and sales for FuelQuest Inc. A lot of lubes companies without a well-defined strategy may have put up a [website] catalogue, and then said, Okay, we did something, lets check that off. And they never followed up with it. [Online sales have] taken much better hold with fuels.

Kline cited several reasons for e-commerce failing to win popularity among lube companies. Many suppliers find that distributors and end users see no clear cost benefit of conducting transactions online. Others lack the technology or understanding needed to use it. And, as Petroleum and Energy Practice Director Geeta S. Agashe said, Many end users simply prefer the old-fashioned way of doing business.

Still, the Little Falls, N.J., firm expects rapid growth of online lube sales for the next several years. It estimates that 185 million gallons – 6 percent of U.S. sales – were transacted over the Internet in 2001. It predicted that the rate will grow at a 52-percent annual clip, topping 1 billion gallons by 2005.

Kline listed several factors that it expects to contribute to the breakthrough. The first is the development of electronic standards and more sophisticated trading software that will make it easier for different platforms to exchange data. In addition, broadband Internet connections are proliferating, allowing more businesses to rapidly transfer large amounts of data. Also, cultural barriers to online transactions are gradually being eliminated.

Online service providers agree in general with the growth forecast, which of course they would welcome. ChemConnect Vice President of Marketing Michele Hincks said the online marketplace already has lube producing customers that purchase materials – such as additives – online.

Lubricants have been slower to trade online, she said. But we know that lubricants would be subject to the same efficiencies from online trading. ChemConnect contends that e-commerce can help companies reduce transaction costs by 10 to 15 percent.

That kind of efficiency drives savings, she said. All companies are looking for that. Thats why I am assuming that, over time, [lube producers] will start selling their outputs online.

FuelQuests Haugh said it is common sense to expect e-commerce to penetrate the lubricants market, given that is has already become popular with larger sectors of the oil industry.

The majors that sell lubes are already using e-commerce for things like fuels, he said. Its just going to take a little bit longer to trickle down to lubes because its a smaller spend item. But if the same economies are available to lubes, then theres no reason for it not to happen.

Kline predicted that online sales will take off first in industrial markets, such as oil and gas extraction, transportation, construction, electrical equipment and power generation and fabricated metals. It expects that commercial automotive and industrial markets such as primary met