Total U.S. lubricant sales volumes in the second quarter of this year edged down 3.2 percent compared to the same period in 2007, according to the latest sales data from the National Petrochemical and Refiners Association. The likely cause: fewer miles driven per vehicle as owners recoiled from high fuel prices, says an industry expert.
The organization on Sept. 12 released its Quarterly Index of Lubricant Sales, showing that volumes for the second quarter fell across the automotive and grease sectors, while the industrial lubes and process oil sectors remained virtually unchanged, compared to 2007s second quarter. The update came just two weeks after first-quarter data were available.
The NPRA report uses 2006 as the base year. An index value of 100 represents the average quarterly volume for 2006. The 2008 second-quarter index value was 97.6, compared to 100.9 for the second quarter of 2007.
The automotive segment dropped 5.4 percent to 93.7 in the second quarter, compared to 99.1 in 2007s second quarter. For January through June, automotive sales fell 6.2 percent to 92.2, down from 98.3 a year earlier.
The slowing of the U.S. economy had some impact overall on lubricant sales across the commercial automotive, consumer automotive and industrial sectors, said Tom Glenn of market research and consulting firm Petroleum Trends International, Metuchen, N.J. Glenn added that other factors came into play, especially in the consumer sector, that go beyond the economys cooling down.
Several issues contributed to continuing decline in lubricant demand in the second quarter of 2008, and to the decline in the first quarter as well, he told Lube Report. In short, its about the laws of supply and demand. Supply and demand determine both the price and quantity of products sold in the market. When prices go up, demand will typically go down.
Glenn said that while rising finished lubricant prices are a factor, they are not the only one. Weve seen prices move up by close to $1.60 per gallon the first two quarters of 08, and nearly another $1.50 so far in the third quarter, Glenn noted. This does compound the problem. I think in this case though it is not the primary issue.
The key factor driving down demand in the second quarter, he said, was the rapid run-up in the price of fuel. The price of gasoline rose roughly $1.10 a gallon from the beginning of this year to July, Glenn continued. Assuming you have car with a 15-gallon tank, that means the cost of a fill-up went from $45 to $62 from the beginning of the year to July, and for an SUV, from $54 to $74. These steep fuel prices caused many consumers to walk more, drive less, carpool, sell their SUVs and take other steps to save money, he added.
Where were seeing big change is in the miles driven, Glenn said. Fuel consumption is down, and therefore the time to get 7,500 miles on vehicles before the driver gets a vehicle in for an oil change is going to take longer.
On the heavy-duty side, many trucking companies – especially independent operators – find themselves on the edge in terms of profit margins because of the skyrocketing diesel fuel costs. Typically an oil change for a diesel truck will run about $300, he added. Truckers Ive talked to, especially independents, say, we are doing what we have to do to survive right now – that means breaking some of the rules, including extending some of our drains.
In other product categories, the NPRA data show grease sales fell 8.8 percent to an index value of 90.4 in the second quarter, compared to 99.1 a year earlier. Through the second quarter, grease sales declined 10 percent to 82.9, compared to 92.2 in the year-ago period.
Industrial lubes nudged up 0.3 percent to 100.1 in the second quarter, compared to 99.8 in 2007s second quarter. For the half, industrial lubes had an index of 96.5, down 0.6 percent from 97.1 in the year-earlier period.
Process oils sales went up 0.5 percent to 107.4 in the second quarter, from 106.8 a year earlier. Through the first six months, process oils posted a 104.8 index, up 1.3 percent from 103.5 in the year-ago period.
NPRA emphasizes that its quarterly reports are meant for use as a gauge of market trends, rather than a measurement of total sales, because relatively few marketers participate. The associations member companies that report quarterly data are refiners as well as marketers, representing more than 65 percent of the lubricants volumes reported for the associations more comprehensive annual report on U.S. lubricating oil sales.