North Americas premium synthetic motor oil market is dominated by several brands, including Mobil 1, Pennzoil Platinum, Valvoline SynPower, Castrol Edge and Amsoil. This is a profitable segment, she continued, with 8 percent annual growth in North Americas overall flat-to-declining engine oil market.

A synthetic blend, on the other hand, has come to include any motor oil that uses API Group III as a correction fluid, no matter how little. The value of synthetic blend claims has deteriorated over time and is now on par with conventional claims, said Vela. The claim says nothing specific about oil quality or performance. It brings little to no value to marketers, as too many conventional oils use the term. And it fails to command a price premium.

Consequently, she noted, many marketers no longer have a true mid-tier product in their lineup. And many large marketers dont call their oils part synthetic or synthetic blend.

North Americas market is becoming more and more segmented, with ultra-low viscosity oils, Dexos, high-mileage oils, green oils including rerefined and bio-based, and a growing number of private labels penetrating the premium market. A new mid-tier will evolve, Vela predicted, and Dexos will fall into the mid-tier.

Focusing on a premium GF-5 oil means marketers can tell a story about why their oil is better, Vela continued, and that allows them to capture value. But, she cautioned, it takes the right additive package as well as a quality base stock to provide differentiated performance.

As an example, she highlighted the benefits of Infineums premium technology over conventional GF-5 technologies. The premium full-synthetic oil extends drain intervals to 15,000 or 20,000 miles; it provides better fuel economy; it significantly outperforms Dexos1 oils on the Sequence IIIG test; it provides stringent cleanliness as well as fuel economy; and more.

But its costly, said Vela. Premium technology, with high levels of antioxidants and high quality base stocks add cost.

SAE 0W-20, Dexos1 and the growth of full synthetics have put strains on Group III supply, she said. Group III supply was very tight in 2011, although it should ease as Nestes new supply reaches North America. In addition, Shells introduction of gas-to-liquids base stocks in their own products will ease supply issues. Polyalphaolefins are also in very short supply, but new capacity is promised to come on stream over the next two years.

The use of premium base stocks, viscosity modifiers and additive packages offers oil marketers the ability to capture higher value through truly differentiated features, Vela concluded, and premium performance has value for the consumer.