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When you drive into your local car dealership or quick lube for an oil change, you expect that you will get the engine oil that is featured or that is advertised. You can always ask for a brand that is not in the bulk tank, but youll wind up paying extra for that choice.

So how do you really know what youre getting? Actually, you dont have a clue, other than the honesty of the dealer.

Major oil marketers also have concerns about the oil being sold with their name attached, and bulk oil tanks are an important sales channel. In fact, many quick-lube contracts with oil marketers include a clause stating that upwards of 80 percent of the oil sold must be the brand supplied by the marketer whose name is on the marquee. Usually the wholesale prices are lower for bulk oil, representing the branded marketers costs plus margin. The installer in turn is free to charge whatever he wants for the oil; at times some actually take a loss on the oil change in order to get the traffic into their shops. This is a similar practice to the loss-leader strategy employed by auto parts and big-box stores.

Some dealers and quick-lube owners, however, have been tempted to find less expensive oil and purchase it for their bulk tanks. They can save a few dollars per load – and still reap the benefits of the national marketers advertising and promotional efforts on their storefronts. Let me make clear here that I do not know of any specific dealer or quick-lube operator who is currently engaging in this sort of illegal behavior. However, in a past life, I was aware of this going on.

So were back to the same question: How do you know that you are getting the oil you think you are paying for and that the oil company thinks it has supplied to the dealer? Most major companies have a system to be sure that what they deliver to the outlet is actually there. It involves quality controls, inspection, assurance and protection. Things such as proper blend-facility design (no cross-contamination of products), clean tank cars and trucks, proper testing of the blended products, and careful selection of components are typical parts of the quality package.

Now Shell – owner of the Shell, Pennzoil and Quaker State engine oil brands – has raised the ante. It announced that effective July 1, 2009, it will be testing oils in its marketers bulk tanks to ensure that they in fact contain the Shell product that is advertised. This watchdog program was rolled out in Detroit but will be nation-wide by the end of the year.

In its announcement, Shell indicated that it will identify its oils by the use of a tracer, plus examination of the oils general chemistry. Lest you think that this is an innovative approach to product quality protection, let me assure you that most of the major oil marketers have some way of identifying their oil. Shell is simply the first to go public.

How do the oil companies know which oil is theirs? Lets start with the two major techniques Shell is using: tracers and chemical testing. This will help you understand the approaches, their strengths and weaknesses, and the probable result of this program.

For years, oil majors relied on the honesty and integrity of bulk oil purchasers to sell their product. But in the late 1970s and early 80s, as the cost of finished oils began to increase, a few bulk oil customers thought that they could buy off-brand oil at a lower price and sell it as a major brand. So long as the oil was approximately the same quality, they felt safe in doing so.

Before long, the oil majors recognized that the volume of branded oil they were selling was noticeably less than the volume of oil being resold by the bulk customer. It was obvious that something was going on – and it was costing the oil companies a lot of money in lost business.

Putting a tracer into the oil seemed to be a good option. However, how can a tracer be added without being spotted by the customer? If that happened, the tracer could be compromised and the advantage lost. Among the materials used as tracers were dyes, proprietary chemical compounds and metal salts, used in concentrations so minute that normal detection methods would not pick them up. In fact, even if you knew that a tracer was in the oil, you wouldnt waste time trying to find it; it would be too costly and time-consuming. New analytical techniques also helped to make it possible for oil companies to use micro quantities of tracer and reliably detect it – and of course they knew what to look for.

The technique worked in many instances. Unscrupulous customers were identified and their contract with the oil brander cancelled. There were howls of indignation but the data were so strong that no one was able to disprove the assertion that they were cheating. By the late 80s the behavior seemed to subside and oil majors began to get comfortable with the idea that the tracer would be sufficient to control off branding of oils.

Things stayed at status quo for years – until the big run-up in engine oil prices which started in 2000 and then accelerated over the past three years. Oil switching became a concern once again, and tracers were now being detected by mainstream oil analysis techniques. It was time for a more sophisticated methodology.

While each engine oil formulation which meets a particular API or ILSAC standard contains very similar chemistries, every additive supplier has its own twist on how to meet these performance needs. So their additive packages have subtle differences that can be detected by using thorough analytical techniques.

For example, one additive supplier uses a type of process which results in a dispersant which is darker and more viscous. Another additive supplier uses a particular metal for its detergents, while others use different metals. The choice of antioxidants, friction modifiers and other specialized components also varies by supplier.

By careful analysis, a savvy company can clearly identify its own oil as well as competitors products. It also can identify the additive supplier that each oil brand uses. In addition, it can uncover whether a competitor has changed supplier and/or performance level.

Such information can be very useful when competing in a given market. It can give the oil company important clues about competitors costs and what performance claims they would be able to make versus what claims they are actually making. All of these data can help give the oil marketer an edge in a very competitive marketplace. Of course, much of this depends on the skill of the analytical team that deformulates the oil.

The downside of such a complete analysis is the testing cost as well as the time involved in doing the work. It could take weeks to carry out an analysis, and the cost would be in the thousands of dollars. Obviously this is not a procedure that is applied on a regular basis. Instead, a partial analysis of the oil is used which clearly identifies the marketers oil but not to the nth degree. Coupled with a unique tracer, this is a strong identity method. (Think of it as simple fingerprinting, versus a full-blown DNA work-up.)

Shell has started the ball rolling. Its broadside was soon echoed by independent blender Warren Oil, of Dunn, N.C., which said it too had seen its products commingled and switched with other brands. Warren vowed to begin adding tracers this month prior to shipping its Warren, Coastal and Lubriguard brand bulk oils, to help assure the right oil ends up in customers tanks and deter distributors from mixing its products in with others.

But the entire industry – from oil marketers to distributors to individual dealers or quick-lube operators – could be doing a better job of keeping tabs on the bulk motor oil distribution system, and ensuring that customers get what they pay for. If they dont, it will take only a few less-than-honest distributors, dealers and quick lubes to give the entire industry a bad name and severely damage an important market.

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