Finished Lube Prices on the Rise


Struggling to keep pace with rising costs, lubricant marketers in the United States are pushing through another round of price hikes for finished products.

Major suppliers haveannounced markups that take effect this month or next, and independents sound eager to follow. Three rounds of increases so far this year have helped to offset the impact of higher costs for base oils and additives. But blenders say they have gained little relief due to increases in other expenses and the markets reluctance to accept finished lube markups.

According to oil company notices and comments by lube distributors, the biggest lube marketers are all raising prices this month and next. Levels of increase are generally consistent, though companies have different ways of stating them.

ExxonMobil kicked things off with an Aug. 1 hike of 6 percent for conventional lubes and 3 percent for synthetic products. ConocoPhillips, Citgo and Chevron all moved mid-month, with the first two reportedly adding 30 cents and 28 cents per gallon, respectively, while Chevron went up 30 cents on conventional products and 48 cents on synthetics and semi-synthetics.

Valvoline and BP are both scheduled to move on Aug. 29. Valvoline will raise prices between 24 cents and 48 cents per gallon, BP between 2 percent and 7 percent. Shell will markup between 4 percent and 7 percent on Sept. 6.

Independent blenders contacted for this article said they have announced increases on prices for their own brands, or plan to do so soon.

We are definitely supporting it, said one blender, who spoke on condition of anonymity. They [major marketers] couldnt do an increase big enough to suit us.

This is at least the third series of hikes for finished products in 2005 and at least the fifth in the past 16 months. Traditionally, the market averages about one increase a year, and it is not uncommon to go a year or more without changes.

Although blenders are generally uniformly affected by cost increases, marketers say they find it increasingly difficult to passalong those increases. Part of the reason is that customers, especially original equipment manufacturers and private label customers, often require documentation before accepting markups. Blenders say the process can get drawn out.

Personally, I think there is an amount of stalling that goes on, said one independent blender in the Midwest. Whatever the reason, it often takes weeks or even months for our own price increase to take effect. On the other hand, when the base oil suppliers give us notice that they are raising prices, those increases take effect immediately.

In addition, independent blenders and distributors complain that major oil companies may raise prices for distributor sales but hold off on doing so for direct sales.

I know of direct sales accounts for one major that have not received increases for more than a year now, a Southwestern distributor said. Its impossible to even think about competing with that, but it sure affects your business.

Others said that the price increases of the past year and a half have not even begun to address increases in costs of doing business.

A lot of people dont realize how much your costs go up simply as a result of the fact that youre dealing with higher dollar amounts, anMid-Atlantic oil jobber said. For one thing, your cost of inventory escalates and you have to borrow money to support it. Our inventory costs are up more than $800,000 from a year ago. Likewise, your costs of receivables also go up.

Theres nothing good about [rising prices]. You have to streamline and become more efficient, but theres limits to how much of that you can do.

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