Meanwhile, others said industry would be swimming in low-cost, high-quality base stocks. Rest easy, they continued to say last year, a surplus was assured.

Not surprisingly, independent lubricant blenders and others who depend on the merchant supply of base stock took comfort in the latter forecast. And why not? Its what they wanted to hear, its what they wanted to believe. After all, that forecast was widely accepted and repeated, and was backed by what looked like plausible assumptions, solid data and knowledge of a major plant expansion.

Alas, as most in the industry are aware, that surplus didnt happen. But you cant blame those consultants who predicted a supply overhang. They certainly could not have anticipated a Category 4 hurricane slamming into the U.S. Gulf Coast, followed right behind by a Category 3. Nor could they have anticipated delays in new capacity coming onstream, unexpected plant closures, slow turnarounds, operational problems and the skyrocketing price of crude.

Because of these events, the supply of base stocks is tight and prices are way up. White oils are scarce, Group III base stocks are in short supply, and prices for all types and grades of base stocks have climbed roughly 85 percent over the last two years.

In addition, despite the anticipated expansion of the Motiva refinery in Port Arthur, Texas, at this writing no new juice is flowing yet from its veins. This delay has further impacted the anticipated supply of Group II and II+ base stocks. As a result, the entire lubricants industry continues to struggle as companies implement force majeure and allocations of both base stocks and finished lubricants.

In Europe, the base stock supply picture is not much different. The market there remains very tight, with white oil scarce due to the recent shutdown at the ExxonMobil refinery in Port Jerome, France. The continents Group III is also tight as imports from the Far East are limited, although in the short term some Russian base stocks may flow into Europe to balance some of the regional shortfall. Many majors in the region have shut-downs in progress or scheduled, while Asia-Pacific and in particular China continue to increase their demand for all base stock grades at an alarming pace.

Thats today. But what does the future hold?

Although some of todays supply shortfall will be addressed following the various refinery turnarounds, the availability of base stocks in the near- to mid-term should remain a significant concern to many producers, traders and blenders.

First, although the Motiva expansion will add valuable Group II and II+ barrels to a supply-deficient market, Shells recent announcement that it will market the Motiva stocks in Europe has many wondering how much of the new output will be realized in the U.S. Market.

Another concern is Valeros announcement about its intention to cease Group I production in Paulsboro, N.J., perhaps in 2007. Although this will help to further balance the Group I surplus, it leaves the U.S. Northeast with only one regional base stock producer, American Refining Group.

Plans for small Group II/II+/III expansions at Petro-Canada and Calumet also offer the market little assurance of a recovery. Thats because these expansions will be offset somewhat by the withdrawal of Imperial Oil from the hydro-cracked base stock market.

And finally, for those still waiting for the flood of high-quality, low-cost gas-to-liquid base stocks to hit our shores, help could indeed be on the way – although many of the announced projects remain just announcements. The question remains as to the actual number of new GTL and Group III facilities that will be built with the interest of producing high-performance base stocks.

All this means there is a reasonably high probability that the U.S. supply of base stock will remain short in the near term and prices will continue to rise.

But it also suggests another point: When the industry runs lean, makes to order, participates in just-in-time delivery, and consolidates production to a small number of behemoth suppliers clustered in a narrow band of geography, we become more susceptible to supply-line interruptions. Rather than spreading our risk, we have consolidated it. This might not be what buyers of base stocks want to hear or believe, but it is something they need to know and understand when judging the forecasts they hear.

Although no one can predict Category 5s, fires and floods, we can be sure that something unexpected will occur; it always does. Except now when it does, its impact will be greater than ever before.