Finished Lubricants

The Valued PCMO Market


The Valued PCMO Market
© tong2530

Need to Know

It’s common knowledge among those in the lubricants business that demand for passenger car motor oil in the United States has declined over the years. The downward trajectory has been and continues to be driven by extended oil drains, reduced makeup oil, onboard oil change indicators and other factors. The emergence of electric vehicles has also begun to gnaw away at demand, and its negative impact on PCMO sales is expected to ramp up as the EV population grows.

To get a sense for how much PCMO demand has dropped, consider that in 2002 demand reached nearly 750 million gallons. By 2022, it dropped to just over 400 million gallons. This represents an organic loss of 350 million gallons, or 45% of the market. To put the magnitude of the lost volume in perspective, it’s close to 20 million gallons more than the combined total of PCMO sold in the U.S. by the two leading majors in 2002. 

While the volume of PCMO consumed dropped dramatically over the past two decades, the value of the business tells a different story.  Yes, the volume of the business plummeted from 2002 to 2022, but its value increased by nearly 20%. Understanding why starts by comparing and contrasting product tiers and pricing.  

Over 90% of the PCMO consumed in the U.S. in 2002 was conventional motor oil. Although synthetic motor oil had been in the market since the 1960s, the high cost of the PAO used to blend it made it cost-prohibitive for most motorists. Also, few OEMs specified a higher-quality synthetic engine oil.  Understanding that the comparatively lower-priced API Group III was just starting to get its legs as a synthetic base oil at the start of the millennium, synthetic and synthetic blend PCMO accounted for only about 5% and 3% of the market, respectively, in 2002. With that, about 90% of PCMO sold at that time was at the low-price tier, which back then averaged $1.51 per quart for major brands sold at mass merchant stores; store brands were selling for $0.74-$0.84 per quart. In 2022 inflation-adjusted dollars, that put most of the motor oil consumed in 2002 at a retail price of $1.24-$2.53 per quart. Synthetics and synthetic blends were selling for $2.19 and $4.13 in 2022 dollars, respectively. Together, these higher-tier products accounted for less than 10% of demand.   

Driven by acceptance of Group III as “synthetic,” changes in NOACK volatility, shifts to lower viscosity grades, OEM specifications, and other factors, the profile of the product tiers that make up the market is quite different today. Unlike in 2002 when conventional motor oil had the primary influence on the market value, in 2022 the higher-priced tiers of synthetic and synthetic blend PCMO dominated the market’s value and pushed it higher despite declining volume.  

While the shift to higher-priced tiers was driving market value up, continuing growth in the DIFM and service fill business put downward pressure on the value due to the price differential between packaged products and bulk. Where DIFM accounted for a little over 50% of the market in 2002, it reached roughly 75% in 2022.

Figure 1. Volume and Value of U.S. PCMO Market 2002 and 2022

In addition to growth in DIFM, growth in private label sales also had a negative impact on market value due to its lower price when compared to major brands. While private label accounted for an estimated 10% of the PCMO business in 2002, by 2022 it captured about 30%.  

Taking these and other factors into consideration, while PCMO demand volume dropped by roughly 45% from 2002 to 2022, the value of the market increased by nearly 20%. Importantly, this value is based on the mix of products sold as packaged products to retail channels as well as bulk and packaged products sold in the DIFM channels.  Understandably, the market value differs at various levels in the supply chain. 

The message here is that while it’s common to hear that the U.S. PCMO business is declining, the market value says otherwise. Further, there is still significant headroom for even greater value as demand shifts from synthetic blends to full synthetics.  This shift will continue to occur as OEMs increasingly favor light viscosity grades and more demanding performance specifications.  However, the move to higher-quality and higher-performance PCMOs will likely also mean longer drain intervals and further reductions in demand volume. In fact, much of the volume loss over the past two decades occurred because drain intervals increased from 3,000-4,000 miles in the early 2000s to 6,000-7,000 now.

It’s also important to consider the reality that there is no agreed upon or legally set definition in the U.S. as to what constitutes synthetic blend and synthetic motor oils. Because of this, there is increasing concern among blenders and marketers about the blurring of lines that separate these tiers and how this can diminish both the value of the products sold and the value of the business.  While in theory market value should grow as demand moves up the product tiers, questions remain about how margins are affected at each link in the supply chain as the intensity of competition heats due to continuing declines in demand volume. There is little doubt that continued volume declines will only complicate the value of the market further.   

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: