Weathering a Silent Storm
Many of the developments that affect base oils and lubricants are best described in terms of natural phenomena. When Chevron’s Pascagoula base oils plant came online in 2014, participants talked about a “tsunami” of product hitting the market. This July, during a webinar hosted by the Independent Lubricant Manufacturers Association, Colleen Murphy of Motiva said that the company’s leadership team referred to the COVID-19 pandemic as a “global hurricane.”
Just when you think the situation may be under control, something happens to upend everything again. In early June, the base oils market showed the first signs of recovery, having been pelted by a hail storm of pandemic-related effects since March. A sharp drop in fuel and lubricant demand on the back of stay-at-home orders, reduced manufacturing operations and supply chain disruptions, and deeply damaged consumer confidence were some of the challenges the industry faced.
As lockdowns and other pandemic-related measures eased and demand began to pick up, base oil suppliers introduced price increases on tight supplies and rising feedstock costs.
Paraffinic producers implemented 15 to 16 cents-per-gallon posted price increases between June 15 and July 1, with Motiva, Chevron and ExxonMobil leading the pack. For naphthenics, Cross Oil increased its pale oils by 20 and 25 cents on July 16, and other producers considered similar moves.
In other parts of the world, prices also stabilized or edged up in June, with Asian producers, for instance, lifting some offers by as much as $40 per metric ton.
Then came another wave of infections in the United States—more insidious and worrisome than the first—testing participants’ confidence in the market recovery.
With no roadmap to follow and no precedents to emulate, the industry must find its own way to deal with the consequences of a silent but devastating storm that is affecting all aspects of life. One element that seems to be crucial is flexibility, and the industry has fortunately shown through previous disasters that it can muster plenty of it.
Gabriel Wheeler is base oil editor for Lubes’n’Greases. Contact her at Gabriela@LubesnGreases.com