Lube Prices on the March

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Most major oil companies have notified U.S. customers of finished lubricant price hikes in recent weeks that will kick in from late June to early July, but some observers claim the relatively small increases are squeezing independents.

  • Shell on May 10 informed customers it would increase prices on finished lubricant products up to 8 percent effective June 28.
  • ExxonMobil notified customers May 17 it would raise prices for its branded and unbranded lubricants and greases by up to 9 percent effective July 1. Different price treatment may apply to selected products, ExxonMobil stated in its letter.
  • Valvoline customers received letters dated May 17 detailing price hikes on finished lubricant products of up to 9 percent effective June 21, varying by product and segment.
  • ConocoPhillips told customers May 17it would push up prices for finished lubricant products by 6 to 9 percent starting July 1, depending on product-specific factors.
  • On May 18, Chevron informed customers it would bump up prices on all lubricating oils, gear lubes and greases by up to 10 percent effective July 1. The companys letter noted some specific products may increase in amounts outside of the general increase.
  • Citgo notified customers May 19 it would raise prices 8 to 10 percent on Citgo, Mystik and private label brands, including bulk and all package styles, effective with shipments occurring on and after July 1. Some specific product price changes would fall outside the general increase, the companys letter noted.
  • Petro-Canada recently told customers it would increase area-wide and book pricing for its finished lubricants by 10 percent beginning June 18 for bulk and all packages sizes at all warehouses. The increase doesnt include Paraflex process oils and white oils, which had a previous increase effective May 27.

Almost every notification included a variation of Shells comment to its customers: This adjustment is due to increasing costs of raw materials used in the production and delivery of our products, the company explained its letter, which also noted that since February 2010, [API] Group I base oils have increased up to 22 percent and Group II base oils up to 15 percent.

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A distributor told Lube Report, I assume theyre trying to recover their costs from the recent base oil cost increases. Some of the additive companies are just now doing their increases. I think its going to be an expensive year.

This source noted base oils are very tight right now due to allocations at Motivas Port Arthur, Texas, base oil plant and other issues. Market sources in May told Lube Report that Motiva had placed its customers on a sales allocation plan of 50 percent for Star 6 (220 vis) and 75 percent of historical contractual volumes for all other grades.

An official with an independent blender told Lube Report that while the latest round of price increases is a cost pass through of both base oil and additive increases, the ILMA blenders will not be able to pass along true cost increases because the majors are once again putting the squeeze on them with smaller increases and later effective dates in an attempt to buy back volume and reduce the price difference to distributors between independent blenders and major oil companies. That again creates extra hardship on independent blenders, this source stated.

The Independent Lubricant Manufacturers Association has decried the price squeeze, referring to rapid escalation in the prices of base oils sold by refiners to non-refiner blenders/marketers at the wholesale level, and the slow pace the same refiners increase the prices of finished lubricants sold under their brand names. Such activity squeezes the margins out of the finished lubricants sales market and shifts it to the base oil production side of the business, ILMA has stated.

Another distributor suggested the finished lube price hikes may indicate the majors finally recognize the pricing disparity between themselves and the private labels and are taking steps to minimize and close that gap through smaller increases. I think some of the majors want some of that market share back that theyve lost, this source observed.