So it has been over the past few years, as the transition from older established base oil production has given way to higher-specification output from new modern plants. Some of these new plants have – interestingly and perhaps naively – been costed for investment on a minimum operating lifetime of 50 years from start-up.

Indeed, the market has been inundated with new plants that have blossomed on the global stage over the past few years and continue to do so with gusto. One thing is certain: This base oil industry has changed and is continuing to change beyond recognition.

When it comes to pricing for base oils, similar naive assumptions are also brought to bear. Analysts forecast that should crude oil – and hence other petroleum products including base oil feedstocks – rise or fall in line with expectations built upon algorithms, then base stocks will also fall into line with the same algorithm, even if there is a lag.

However, the market does not take into account future catastrophes such as hurricanes or conflicts, or consider crucial geopolitical events, like North Koreas nuclear ambitions. Nor, more parochially, does it consider the effects of an accidental fire at a refinery, which can alter not just local or immediate supplies of base oils, but can also impinge on the global scene.

The point of all this preamble is that base oil pricing is not a science, and it never will be. The unforeseen eventualities surrounding this market are so wide and unaccountable as to make a mockery of many forecasts that have been attributed to experts in their field. There are events that can affect supply and demand, such as the opening of new plants.

But will the operators of these new plants abide by market rules and sell their wares at the prescribed prices that everyone expects? Or will they try to buy their way into an established market by lowering prices to entice receivers into purchasing, leaving incumbent suppliers with no option other than to leap on the new pricing bandwagon? Or will they put their base oils into storage and wait for better weather?

When an investment is made into a new plant, the clock immediately begins to tick for a return on capital employed, known as ROCE, and shareholders want to see positive signs emerging from a new revenue source via the people they employed to make this happen.

If a new base oil plant is to open and production commences when a market sector is long – and the market really doesn’t need another player competing for business – the problems can be tackled in a number of ways. If the company determines this early enough, the project can be scrapped or delayed. If the plant does proceed to open, then production rates can be reduced or the material coming out of the installation can be sold into specific regions at lower prices than the current market to move quantities of base oil out of production and storage.

The latter approach would reduce ROCE, of course, but fixed costs can probably still be covered, and the operation can look to the future when the market requires larger quantities of these products and there are opportunities to hike prices to levels that are acceptable to all investors.

This scenario is apparently what has happened in the Group III market, which has a global surplus of supply because of recent openings. Still more capacity is in the pipeline, and some contend that the audience for it is small. The argument in defense of such projects is that there is never a right time to enter a market and that quantifiable risks must be taken to establish a new supply source in an expanding market. Another is that the market is growing faster than forecast and that everything will pan out to reinforce previous decisions.

Could this same play be reenacted on the Group II stage, where within a space of some five years the global markets will have seen new production potentially in excess of 5 million metric tons per year hit the scene? There certainly has not been growth in the Group II sector, or any other base oil market, to soak up these new quantities, nor has there been such a decline in the availability and transition from Group I grades to afford an ingress on this scale. Will prices be affected by a glut of material hitting saturated marketplaces? Or will production be scaled back to fit into the current regime, allowing new players to take their place on the field?

There are a great many questions surrounding the future of both Group III and Group II markets and the participating players. Certainly in the longer term, this new production will be taken up sufficiently to justify the investments and will also protect the profiles of many of the producers who, as majors in this field, see it is as imperative to have a place at the top table.

Although many see the current changes in the base oil industry as the whole book, they are in fact only a chapter. The one real forecast being made here and now is that the industry will see constant change in terms of facilities and a progression to Group IV, Group V and beyond to new and exciting levels of tribology.