Lube Marketers Back Down on Price Hikes

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Three major oil companies eased off recently from previously announced price hikes for finished lubricants, with two postponing markups and the other deferring its increase indefinitely.

Their actions suggest that a two-year run-up in finished lube prices in the United States may be losing momentum. Lube distributors declared it is time for prices to end their ascent, but blenders said a leveling off would keep them from recouping cost increases that still have not been passed through.

Beginning with an Aug. 21 notice by ExxonMobil, every big U.S. lubricant marketer – and numerous smaller blenders – had announced plans to raise prices. Changes were scheduled to take effect throughout this month for what would be the third round of increases this year.

On Sept. 20, however, Chevron said it would postpone its increase from Oct. 2 until Nov. 1. ConocoPhillips issued a similar notice a week later, delaying its increases from Oct. 9 until Nov. 1. On Sept. 29, Citgo said that its increase, originally scheduled for Oct. 30, had been put off indefinitely.

None of the notices offered specific explanations. Citgo came closest, saying it reconsidered because of significant changes in market conditions. Many observers surmised, however, that the three companies were spurred by the recent drop in crude oil and fuel prices.

Crude is down, gasoline is down, said an East Coast distributor, who asked not to be identified for fear of offending his supplier. Everybody sees that, and then they wonder why lube prices keep going up. People are fed up, and I think the oil companies are starting to recognize that.

Smaller blenders said they have also decided to postpone markups, even while maintaining that they are still warranted. Several said their prices for finished lubricants have not kept up with escalation in costs for base oils and additives.

Theres a disconnect there, a Southeastern blender said. People dont realize that whats true for gasoline is not necessarily true for lubricants and the materials that go into them.

He and other blenders said they have decided to postpone their own price hikes.

Clearly costs for raw materials have gone up, and we would like to pass on those increases, an official with a Midwestern company said. But we also have to recognize the market environment. We dont want to lose our share of the market.

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