ATIEL, the organization that establishes quality standards for automotive lubricants in Europe, amended its rules for motor oil formulations last month to allow temporary use of substitute base oils or additives in cases where suppliers declare force majeure. The change mimics a similar provision adopted in October by the American Petroleum Institute.
ATIEL, the Technical Association of the European Lubricants Industry, described its action as largely a precautionary measure taken to stay in step with API and to prepare in case of events such as those that disrupted base oil and additive markets in North America last year. At the same time, officials said, ATIEL strove not to loosen its requirements too much.
We have tried to strike a balance between rigid adherence to the [Code of Practice] guidelines, which might disadvantage those faced with a force majeure, and allowing too much flexibility, which would have a similar impact on those striving to adhere to the guidelines by other means, said ExxonMobils Mike Wharton, chairman of the associations Technical Council.
The rule adopted by ATIEL allows lube marketers to use substitute base oils or additives for up to 90 days while conducting tests to verify that the alternate formulas still meet licensing requirements.
The API rule makes similar allowances for cases of significant supply disruptions caused by unforeseeable events such as natural disasters, accidents or terrorist attacks. API adopted its provision following force majeure declarations by base oil and additive companies, some triggered or exacerbated by hurricanes Katrina and Rita. Rita, for example, shut down 42 percent of U.S. paraffinic base oil capacity for more than a month.
Wharton said Europe has felt waves from those disruptions, though the impact has been smaller than across the Atlantic.
Its a global business, and base oils are moved from continent to continent, said Wharton, who is based in the United Kingdom. When a global company has shortages in one part of the world, they try to fill it with shipments from another region.
Wharton said ATIEL amended its Code of Practice – which sets requirements for meeting motor oil standards adopted by the Association of European Automotive Manufacturers (ACEA) – after the Independent Union of the European Lubricant Industry (UEIL) notified the association that some independent blenders were unable to obtain the base oils they needed.
UEIL came to us saying their members were experiencing difficulties, Wharton said. What we discovered in working the details was that a lot of the hardship in Europe was commercial hardship, instead of being caused by force majeure. Evidently there were some [independent blenders] that were used to playing the spot market. Then supply tightened, and without long-term contracts, they were getting burned.
Wharton said ATIEL made a conscious decision not to offer relief to that kind of problem because doing so could weaken the standards system and disadvantage companies that maintain supplies during such conditions. As a result, he expects struggling companies will raise the issue again.
Well probably have to deal with it again in 2006, he said.
ATIEL is a Brussels-based trade association that represents 15 of the largest lubricant marketers in Europe, plus UEIL.