Castrol, ExMo Set Pace on GF-4


Castrol Consumer North American confirmed last week that it will offer API-licensed GF-4 motor oils beginning Aug. 2, immediately after the American Petroleum Institute begins licensing oils that meet the standard. In doing so, the company became the first major lubricant marketer to state a schedule for meeting the latest passenger car motor oil upgrade.

ExxonMobil told Lube Report yesterday that it began supplyingGF-4 quality oils to car makers for factory fill last month and that it will offer licensed products of selected grades of Mobil branded oils to the aftermarket some time in August.

Those statements surprised some industry observers, as many had speculated that lube marketers would wait weeks or even months before introducing GF-4 products because of significant cost increases associated with the standard.

Both Castrol and ExxonMobil said they want to provide oils for model year 2005 cars, which are already hitting the market. In addition, Castrol officials said they wanted to continue the companys tradition of being a technology leader.

Others speculated that the two companies could risk losing sales or create logistical difficulties for themselves if other marketers wait to introduce products licensed to the new specification.

There is a substantial risk [in switching early to GF-4 formulations] because of the potential cost differential, said one major motor oil marketer, who spoke on condition of anonymity. Everyone is very conscious of market share right now, and people are frightened by the threat of GF-4 [costs].

Developed by representatives of the automotive, oil and chemical additive industries, GF-4 provides better protection for air pollution control systems and improves fuel economy and high temperature performance. The International Lubricant Standardization and Approval Committee (ILSAC) adopted the standard early this year and API plans to license oils meeting it beginning July 31.

When licensing of the current GF-3 standard began during the summer of 2001, all big marketers of passenger car motor oils immediately converted to GF-3 formulas, even though API continued to license GF-2 oils for nine more months. Some independent blenders put off switching their formulas, taking advantage of the opportunity to undercut their bigger competitors on price.

There seems to be consensus, though, that the additional cost of meeting the new standard will be much greater this time around; sources say base oil and additive costs will rise significantly for GF-4. Indeed, Castrol cited costs associated with GF-4 as one factor in a May 7 notice to distributors that it will raise motor oil prices effective Aug. 2. The markups, which range from 2 percent to 8 percent, are unusually large, according to observers. Castrol declined to discuss prices.

Some observers noted that Castrol gave much more lead-time than normal for the August price increase. Thirty days is typical.

Because of the large cost increase to meet GF-4, many observers have predicted big oil companies would delay offering products that meet the new standard. Some speculated that those companies wanted to avoid switching too far ahead of each other – for fear of their products being relatively high-priced – but were prepared to make the switch as soon as any other company did. Technically, companies could carry parallel GF-4 and GF-3 products simultaneously, but doing so could create logistical complications.

The U.S. Environmental Protection Agency is directing the automotive and oil industries to ensure that GF-4 oils are available for model year 2005 cars, in order to meet new mandates on emissions controls. Some in the lubricants industry have interpreted this to mean that GF-4 oils must be widely available by the fall. GF-3 oils will be allowed to continue bearing APIs starburst certification trademark until April 30, 2005.

Castrol had made no public comment about its plans but, in response to a question from Lube Report, issued astatement May 18 through public relations firm Caster Communications saying that it will offer GF-4 licensed products in some grades beginning Aug. 2. The statement did not specify which grades; presumably they would include 5W-20 and 5W-30 grades, but not 10W-30 or 10W-40.

ConocoPhillips said it is nearly ready to produce GF-4 oils but has not decided on a schedule for doing so.

We are in the process of completing our GF-4 testing, Commercial Lubricants Manager Louis P. Burke said. We are watching the marketplace and will be moving as the marketplace moves. Other major marketers did not respond to requests for comment.

ExxonMobil acknowledged that it does not expect aftermarket demand for GF-4 products to become significant until early next year. GF-4 oils will be compatible with vehicles manufactured before the 2005 model year.

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