If this is an avalanche, it hasnt actually hit [the industry] yet, said one independent blender, who spoke on condition of anonymity. I think its going to get a little worse before it gets better.

ExxonMobil and Shell both confirmed that they have imposed allocations on finished lubricants. In response to an inquiry from Lube Report, ExxonMobil said its allocation – effective Oct. 1 – is 100 percent on an aggregate basis, meaning customers generally cannot order more than their monthly average. It noted, however, that restrictions are tighter on some products. For example, Mobil 1 products have a cap of 65 percent of normal purchases, while some 5W grades of motor oil are limited to 60 percent.

Shells lubricant business in the United States, Sopus Products, imposed volume caps on Sept. 19 for passenger car motor oils and certain transport products. PCMO – including Pennzoil, Quaker State, Formula Shell brands, as well as private label products – is under a limit of 50 percent for packaged orders and 90 percent for bulk shipments. Transport products such as Donax TD/TC and Power Tranz are capped at 50 percent for bulk and packaged orders. Natural gas engine oils sold under the Mysella brand are capped at 100 percent of normal levels.

Both ExxonMobil and Sopus Products said their allocations apply equally to distributors and direct customers.

Market sources said Chevron has also implemented allocations, but company officials could not be reached for comment. BP Castrol and Valvoline were likewise unavailable yesterday, although Valvoline said Oct. 4 that it was operating normally. Observers said this week that they were unaware of any restrictions by the latter two companies.

Most observers agreed that the additive market is the industrys main bottleneck, and Chevron Oronites Oak Point plant in Belle Chasse, La., has been widely fingered as the biggest factor. Just yesterday the company announced that the facility, one of the biggest additive plants in North America, has resumed normal operations for the first time since being knocked out by Hurricane Katrina Aug. 29.

But Oronite is not the only additive company having problems. Lubrizol Corp. said in an Oct. 4 letter to customers it is having great difficulty obtaining enough key raw materials to completely fill all existing and expected orders. The letter cited several specific areas of concern. Availability of sulfonates, which are widely used as dispersants and to neutralize the by-products of combustion, has tightened since the hurricanes forced the closure of several petrochemical plants that produce carbon dioxide. Carbon dioxide is a raw material in the production of calcium sulfonates.

Lubrizol said North America is also being affected by a shortage in Europe of alcohols used to make polymethacrylates, which are used as viscosity modifiers and pourpoint depressants.

The letter did not mention allocations, and Lubrizol did not directly respond to a reporters question about whether it has imposed or expects to impose any restrictions. Instead, the company stated it continues to work with our customers to meet our commitments.Market observers said theyhad not heard of restrictions imposed by the company.

Observers said they were not aware of any restrictions imposed by the other two major additive suppliers – Infineum and Afton Chemical. Officials at Infineum could not be reached for comment, and Afton declined to respond to questions.

Base oil supply is also a growing concern both for lube blenders and for additive companies, which use base oil as diluent. Four major plants along the Gulf of Mexico have been closed for nearly three weeks due to Rita, and together they comprise 42 percent of paraffinic base oil capacity in the United States.

Two of the facilities appear to be within days of reopening. Citgo said yesterday that the process of restarting its Lake Charles, La., refinery began in earnest over the weekend, that several units are now running and that most equipment will be online by the end of this week. The refinery includes a base oil plant with capacity to make 9,500 barrels per day of Group I stocks. Citgo has not yet announced any change to its earlier force majeure declaration, which included base oils.

ConocoPhillips said previously that it plans to restart its Lake Charles refinery this week. Presumably that would lead to the startup of Excel Paralubes, its base oil joint venture with Flint Hills Resources, which is supplied by the ConocoPhillips refinery. Excel Paralubes has capacity to make 21,900 b/d of Group II.

ExxonMobil said last week that electrical power has finally been restored to its Beaumont, Texas, refinery, which includes a 12,500-b/d Group I base oil plant. The company said it is completing equipment assessments and repairs before beginning the start-up sequence, anddid not offer a timeline for resuming operations.

ExxonMobil confirmed imposing allocations late last month on two base oils, EHC 30 and EHC 45.

Motiva said this week that electric company Entergy has restored power to its Port Arthur, Texas, refinery but that repairs to the on-site power infrastructure continue. The refinery includes a 25,000-b/d Group II base oil plant. The company hopes to resume operations by the end of this month.

Blenders said they are even concerned about availability of plastic bottles, in which they package lubricants. Plastic resins are very tight after Katrina and Rita knocked out several ethylene plants along the Gulf Coast. Ethylene is the key building block for plastics.

The situation is still evolving from day to day, said Mark Leiden, vice president of global marketing and strategic planning for Graham Packaging, the largest blow-molding company in the world and a major producer of bottles for the lubes industry. He said he thought Graham has met all its orders.

Some [resin] suppliers have put customers on allocation. Some others have declared force majeure. It looks like the situation is starting to improve, but the market is really vulnerable now to any other disruptions.

Market observers called this an unprecedented piling on of problems for the lubricants industry.

The hurricanes had a major impact on the U.S. petrochemical industry during a time of high demand, said Larry Norwood, vice president of operations for Lubrizol. We have never experienced two events back to back that impacted 25 percent of refinery capacity, 42 percent of base oil capacity and 30 percent of ethylene capacity, shut down 90 percent of the natural gas production and impacted the majority of the chemical facilities along the Texas-Louisiana Gulf Coast.

Observers said some lubricant companies are suffering under the disruptions – and that others soon will. Blenders described being contacted byfellow blenders who had run out of raw materials and were looking to buy product, but said they could offer little help as they tried to protect their own customers. Likewise, distributors reported being contacted by others in their market.

Were okay right now, partly because we stocked up a lot in August to beat a price hike, said one Western jobber, who asked not to be identified. I think the companies with a lot of storage capacity might be okay, but the smaller distributors are really going to be affected.

Prices for base oils and chemicals had risen sharply even before the latest supply disruptions, but numerous companies reported incurring even higher costs to obtain scarce materials the past few weeks. Some said they have paid premium prices to tap alternative suppliers. Others recounted scrambling to arrange trucks for materials normally transported by rail. Some said they have even gone to the expense to airlift materials.

Although the restart of Oronites plant and the progress at base oil plants bodes well for the industry, many observers speculated that supply problems for blenders could still worsen. As Oronite noted, its ability to deliver product is still clouded by remaining disruptions to transportation infrastructure in the New Orleans area. In addition, some worry that lags in supply chains will cause some blenders to run out of base oil, even if plants restart soon.