Finished Lubricants

When Change Is Not a Choice


When Change Is Not a Choice
© ADE2013; Rvector

Need to Know

Among the many extraordinarily difficult issues the lubricants industry has faced since the start of the pandemic, allocation may prove to be the one that has been the most challenging. This is because lubricants are not a luxury item. They are essential, and when buyers can’t get the brands they want—or the volume required from one supplier—they have no choice but to purchase another. When that happens, perceptions about brands and relationships with suppliers can change and in the process erase years and fortunes invested in brand and relationship building. 

It’s no secret that the lubricant industry has been struggling through unparalleled shortages in finished lubricant supply. While there are many reasons why demand is outstripping supply, the rapid increase in demand as the economy recovered from the pandemic, taken together with a series of cascading events affecting the supply chain since 2020, have resulted in extraordinarily tight supply of lubricant additives (and shortages of some base oils at various periods of time). This is particularly the case for PCMO, HDEO—most notably 15W-40, 10W-30, and 5W-40—driveline lubricant additives and grease. Further, rather than supply catching up with demand, blenders say lubricant additives are still in very short supply. Moreover, many are hearing that the supply crunch will likely go on well into next year.  

With few exceptions, every major, independent blender and lubricant distributor says they are struggling with supply shortages. 

Such struggles are evidenced by the price increase notifications that have gone out over the past year and a half.  In addition to citing supply line challenges in one form or another, most increase notifications note that due to uncertainties around supply of raw materials, the supplier maintains the right to limit or allocate customer purchases at its discretion.  While such statements are somewhat vague, the realities are clear. 

One example was recently seen in an announcement by a blender advising its customers it could no longer take orders for full truckloads of HDMO and that all production of 5W-40 had been suspended. Another blender recently noted that due to allocation of additives, its supplier can only provide enough additive to meet 50% of the volume the blender needs to fill orders for PCMO. Other examples include many distributors being put on deep allocation by their major suppliers.

Adding insult to injury, lead times are very long, and even if a blender is fortunate enough to source product, delays in receiving additives—and even some base oils, for that matter—are painfully long due to driver shortages, scarcity of railcars, or railcars breaking down, getting lost or being idled on a track while waiting for a switcher and switch operator. Specific to switching delays, one large blender recently recounted a situation in which it had to stop production of a certain type and grade of motor oil because it was out of additives. Although the additive needed to resume production was within eyeshot just outside the plant’s gate, it had to wait nearly a week for a switcher to move the car onto its spur. 

As expected, the supply crunch also extends to the installers, end users and retailers. 

One of the early indications that installers were running dry came when Toyota dealers got word in July 2021 about temporary outages of SAE 0W-16 motor oil. Dealers were advised that if they run out of 0W-16, 0W-20 could be used in its place for one oil change interval. Similarly, fast lubes and other installers have heard—and continue to hear—suppliers say that they are out of stock or only have limited supply of certain types and brands of motor oils. 

The impact of the supply shortage on retailers also became apparent last year. This is when large voids started to appear where you would typically see Mobil and Shell products on the shelves at Walmart and other retailers. And for those buying online at Amazon and other platforms, the words “out of stock” are often seen for certain brands and viscosity grades. 

The same goes for truck and other diesel fleet operators. Supply of some brands of 15W-40 and 10W-30 have been very tight. And beyond that, some majors have even been out of stock on certain types of HDEO for extended periods over the past year. 

While in the past these brand loyalists may have resisted change due to fear of failure, compromised performance, engine durability and other reasons, allocations put many in a no-choice situation.

So, what happens when an additive company tells a blender it can only provide 50% of the product ordered, or a major says it’s out of product and advises its distributors to offer a private label brand to help assure it retains customers? What about an installer that finds that the major brand it has been using is no longer available or not available in the volume needed to service all the cars that pass through its bays? And what about the fleet manager who pays a premium for the brand it has been sold on as the best and has been using for years?

While in the past these brand loyalists may have resisted change due to fear of failure, compromised performance, engine durability and other reasons, allocations put many in a no-choice situation. Lubricants are essential, and when buyers can’t get the brand they want in the volumes they need, they have no choice but to purchase another. When they do, you can be sure some will find that their switching fears were unfounded and that the premiums they paid might not have been grounded. For those that do, many in the industry are now wondering if they will make the switch back when supply and demand are once again in balance.  

Tom Glenn is president of the consulting firm Petro­leum Trends International, the Petroleum Quality Institute of America, and Jobbers World newsletter. Phone: (732) 494-0405. Email: