More U.S. Finished Lube Prices Rise

Chevron, Phillips 66, Total and Petro-Canada America Lubricants notified U.S. customers of upcoming finished lubricant price increases that go into effect from late February through early March. Like other marketers that announced increases in recent weeks, these companies cited factors such as increasing costs for raw materials such as base oils and additives.

Announcements of increases came from:

  • Chevron, up to 5 percent on all lubricating oils and greases, effective March 1;
  • Phillips 66, up to 5 percent effective March 5;
  • Total, raising prices by 4 to 8 percent for most products effective Feb. 26;
  • Petro-Canada America Lubricants, imposing markups of up to 6 percent across the board, excluding process oils and Purity FG white oils, effective Feb. 23. Process and white oils will rise 10 cents per gallon on Feb. 23.

Previously, Shell, ExxonMobil, Citgo, Pinnacle Resources, Chemlube, Safety-Kleen Systems/Kleen Performance Products, Martin Lubricants and Omni Specialty Packaging announced price increases in the range of 5 to 8 percent - or in some cases of 20 to 25 cents per gallon - with most changes taking effect from around mid-February through the end of the month.

Industry consultant Geeta S. Agashe, president of Geeta Agashe & Associates LLC, said the reasons for finished lubricant price increases have to do with many factors, beginning with the state of the U.S. economy. The better the economy - gross domestic product - the more the industrial production, more new construction, more mining, agriculture, more trade etc. [there is], which all equals to increased lubricant demand, Agashe told Lube Report. On the other hand, there is the issue of increased costs, as base oil prices have increased, additive prices have increased, packaging prices have increased and even transportation (fuel) prices have increased. This creates a perfect storm of rising costs and rising demand.

She noted that when base oil prices increase, finished lubricant prices post increases. But when base oil prices dip, there is a lag effect - of up to 3-4 months - for finished lube prices to dip, Agashe pointed out. Of course, there are logical reasons for this, including the fact that base oils have perhaps been in inventory at higher prices. In many application areas, the cost of lubricants is not the biggest cost factor, and hence not as much attention is paid to it as compared to the larger cost items from the end users.

Ned Zimmerman, chemicals group leader for Cleveland-based market research firm Freedonia Group, said the price hikes are not really a surprise. The impetus really is the usual suspects of raw materials and shipping cost.

Crude oil prices in particular have climbed nearly 30 percent since early October, which in turn has started to impact base oil prices, Zimmerman told Lube Report. While the healthy economy certainly isnt hurting lubricant demand, lengthening change intervals and waste reduction efforts continue to put downward pressure on U.S. lubricant consumption. This lack of volume growth has made it difficult for finished lubricant producers to pass on rising costs.

He noted that with crude oil prices appearing to stabilize at these recent higher levels, and any hedging of raw material costs likely to have been played out, lubricant producers are realizing they can no longer wait to stabilize their margins.

An industry source suggested other aspects that impact businesses in general could also be factors. Ill bet taking it down another level to such factors as employee salaries/benefits, healthcare, insurance, expenses, marketing, sales, advertising - all combined are legitimate reasons too, this source said.

Increased crude oil and feedstock costs, coupled with a tight supply situation, prompted base oil producers to seek price increases in early January.

Motiva led the way, lifting Group II postings by 10 cents per gallon on Jan. 5, and the rest of the paraffinic producers followed with increases in the realm of 10 to 24 cents. Naphthenic producers also raised prices by 20 cents per gallon during January.

On Jan. 31, Chevron initiated a second round of base oil price increases, raising its Group II oils by 15-20 cents/gal. Whether other producers will follow Chevrons lead remains to be seen, but most suppliers agreed that higher production costs continue to exert upward pressure on base oil pricing.

The U.S. finished lubricants market experienced three rounds of price increases during 2017.

One round ranging from 3 percent to 8 percent took place from around Feb. 20 through March 20. A second round of increases, most in the range of 3 percent to 9 percent, took effect mainly from mid-May into early June. A third round of price increases took effect from early through mid-December. Factors commonly cited included rising costs in base oils, additives and other raw materials, as well as for packaging and transportation.

Gabriela Wheeler contributed to this article.