Need to Know
With demand for passenger car motor oil declining and the value of the business moving up due to growth in the use of higher-priced synthetics, there is little wonder why many have asked, what can the industry do to help drive greater use of synthetics? The answers offered up might surprise some, and to understand why starts with a look at how the synthetic lubricants business developed and who the customers are today.
Synthetic PCMO meeting API specifications was first introduced to the market in the early 1970s. Back then, synthetics were blended almost exclusively with the use of polyalphaolefin (PAO) base oil. But although it offered excellent oxidation stability and unapparelled low-temperature performance, PAO cost close to three times more than its conventional counterparts. This made synthetic PCMO cost-prohibitive for most motorists and limited the market to such niches as racing, auto enthusiasts and prestige brand buyers.
While synthetics offered clear advantages over conventional oils and many marketers put big advertising dollars into promoting its use, it remained a tough sell since the higher price was hard and the benefits were soft. This, however, changed seemingly overnight when in the late 1990s Castrol replaced PAO in its synthetic motor oil formulations with API Group III.
Castrol’s switch to Group III represented a significant decrease in the cost to blend synthetics. Although Mobil challenged Castrol’s use of the term “synthetic” by making its case at the National Advertising Division of the Council of Better Business Bureau, Castrol prevailed. On April 5, 1999, the NAD announced that Castrol North America could continue to advertise its products as synthetic motor oil. Most marketers who had full synthetic or synthetic blend products made the switch from PAO to Group III shortly after the ruling was announced to take advantage of the lower blending costs, and additive companies provided the approvals to facilitate their use. Still, until original equipment manufacturers began to require these products by way of specifications, they remained a small share of the market.
A significant ramp up in demand began in 2009-2010 with the introduction of SAE 0W-20 as well as the GM dexos1 specification. The new API and ILSAC specifications drove to products with significantly higher oxidative stability and deposit protection, lower volatility and fuel economy improvement. These targets clearly favored base stocks with improved viscosity index, thermal-oxidative stability and Noack volatility. For some viscosity grades, this meant partial or full use of Group III.
Important here is that while advertising spend certainly helps drive sales, the spark that ignited rapid growth of synthetics was pull-through demand coming from changes in specifications aimed at improving fuel economy and allowing longer oil drain intervals. Also important was formulating oils that retained fuel economy performance.
As CAFE standards ramped up over time, demand for lower-viscosity PCMO and the use of Group III required to meet increasingly stringent performance specifications also ramped up. One example is seen with 0W-20, 0W-16 and even 0W-8 grades. Demand for these grades is growing, and in the absence of a highly unusual formulation, they must be a synthetic to meet the current ILSAC, API and SAE specifications.
So the pathway to increasing higher-value synthetic PCMO sales has already been established, and growth in demand is theoretically set in a large part by pull-through sales as new cars requiring lighter viscosity grades penetrate the market and old cars are retired.
But according to some marketers, theory is unfortunately not necessarily practice, and this speaks to an opportunity for the industry to help accelerate demand for full synthetic PCMO. It starts by working to assure blenders, marketers and installers “do the right thing” by recommending and using motor oil that meet the specifications required for their vehicles.
To this point are two-tiered lines of synthetic oils in the market, where only one is dexos1 approved. Considering the price differentials between the tiers, some question the legitimacy of the unlicensed synthetic products actually being full synthetics versus a synthetic blend, particularly with the 5W-30 grade. Moreover, are such products a blend, and if so, how much Group III, if any, is actually in it? Are the unlicensed products tacitly being sold as meeting the dexos1 specification while being priced lower because they are not burdened with the cost of the licensing fee?
Further, with the advent of higher viscosity index Group III stocks and the improvements seen in Group II stocks, various combinations are said to be used to blend products marketed as synthetic or synthetic blends. Important here is that since the time NAD ruled that Group III is a synthetic—and in the absence of a technical definition for a synthetic or a legal distinction between the terms synthetic and synthetic blend—the word synthetic has morphed into a marketing term in the United States lubricants business. And as a marketing term, we now see a wide variety of descriptors: synthetic, 100% synthetic, premium synthetic, full synthetic, all synthetic, ultra synthetic, syn blend, synthetic blend, parasynthetic, and semi-synthetic. Taking the lack of uniform, standardized definitions into account and the number of modifiers used to market synthetics and synthetic blends, some might argue that the term “synthetic” on a motor oil label is puffery.
So while some ask what more can be done to accelerate demand for synthetics, the more important question may be, what can the industry do to help assure consumers get the correct oil that meets the specifications required for their vehicle? When that’s certain, you can be sure demand for synthetics—as defined by products made from Group III—will increase as new cars requiring lighter viscosity grades continue to penetrate the market and old cars are retired.
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: tom_glenn@petroleumtrends.com