Finished Lubricants

The Moving Parts of the HDEO Market


The Moving Parts of the HDEO Market
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Need to Know

Heavy-duty engine oil (HDEO) accounts for roughly 39% of the nearly 1 billion gallons of engine oil consumed in the United States. Passenger car motor oil (PCMO) and industrial engine oils account for the balance at about 40% and 20% of the total, respectively. 

While the demand for PCMO is nearly equal to HDEO, the latter is significantly more diverse in terms of engine locations, vocations, and end user wants and needs. It is further complicated by the mix of engines in fleets, specifications, buyer sophistication and other areas. But similar to what is seen in the PCMO market, the HDEO business has changed significantly over the years.

One of the more pronounced changes—and the subject of an informative article written by Steve Haffner for Lubes’n’Greases in November—is the shift to lower-viscosity HDEOs. 

Along with the shift to lower viscosity, there are three other important trends reshaping the business. The first is seen in the volume of HDEO consumed in the U.S. From a peak of nearly 475 million gallons in 2006, demand dropped to just under 400 million gallons in 2022. In a matter of 15 years, the lubricants business witnessed an organic loss of nearly 75 million gallons. 

While there are several factors responsible for the decline in demand, the most impactful has been end users’ continuing quest to extend oil drain intervals. An example is seen in the on-road sector, where drain intervals moved from a range of 25,000-30,000 miles at the start of the millennium to an average of nearly 60,000 miles on new engines running full synthetics in 2022. In fact, some on-road fleets now exceed 80,000 miles. 

Although extending drain intervals has been an ever-present maintenance objective, the ability to do so was facilitated by several developments over the past 20 years. These include the EPA mandating use of ultra-low-sulfur diesel (ULSD) fuel in 2006, improvements in power platforms and exhaust aftertreatment, advances in preventative and predictive maintenance practices, and importantly, great strides in HDEO additive formulation science and technology. 

The significant advances in HDEO additive technology yielded products with improved oxidation, corrosion and wear protection, and the capability for the oil to go the extra miles. In addition, when taken together with the move to lower viscosities, the oils delivered notable improvements in fuel economy. 

The market shift from conventional HDEOs to synthetic and synthetic blends was also integral to extending drain intervals. While conventional HDEO represented nearly 99% of the total in 2007, by 2022 demand sunk to roughly 40%. Over the same period, synthetic blends took a commanding lead with nearly 50% of the total, and demand for full synthetics jumped from a comparative no-show in the HDEO space to nearly 10% by 2022. 

Importantly, the impressive extension of drain intervals necessitated use of higher-performing additives and base oils, and this meant higher-priced HDEO. Where a mid-size fleet would typically pay roughly $7.00-$8.50 a gallon in bulk for a leading brand of conventional 15W-40 HDEO in 2007, in 2022 many of these fleets were instead purchasing synthetic blends. Although conventional HDEO was priced modestly below blends, many opted instead to purchase blends at prices in the range of $13.50-$16.50 in 2022. And for those who moved up to synthetics, at the start of this year they were looking at bulk prices ranging widely from $20-$30 a gallon. 

While it’s clear that the numerous increases in base oil prices and additives seen in 2021 and 2022 caused the price of all ships to rise during that time, the shift to synthetic blends and full synthetics further boosted market prices to the higher end of the HDEO price spectrum. Importantly, this played a role in driving a third significant trend in the HDEO business. This change speaks to market penetration of private label products. 

In 2007, the marquee HDEO brands (Rotella, Delvac, and Delo) accounted for an estimated 46% of the HDEO consumed in the U.S., and other major brands captured another 44%. The remaining 10% was HDEO sold under private labels. The modest showing of private label back then was primarily attributed to end user concerns that use of unfamiliar brands came at the risk of damaging expensive engines and taking equipment out of service. Many end users were, however, forced to face their fears when the pandemic disrupted supply chains. 

Although the supply chain disruptions impacted availability of nearly all raw materials used to manufacture lubricants, the additives used to blend HDEO were in extraordinarily tight supply in 2021 and into the early part of 2022. This resulted in deep allocations and stock-outs for some of the high-visibility HDEO brands. With that, lubricant distributors offered private label brands manufactured by independent lubricant manufacturers as an alternative. When end users found that many of these alternatives met the same standards as the major brands—but priced $2.00 -$4.00 or more a gallon lower and caused no apparent harm—mindsets began to change. As a result of this dynamic and others, private label HDEO accounted for close to 25% of the total in 2022. 

In summary, there are many moving parts in the HDEO business. As market demand and viscosities trend lower, prices are trending up as use of synthetics and synthetic blends continues to grow, and competition is becoming more intense. This may, in part, explain the rationale behind Chevron’s recent announcement that it will be moving to a synthetic blend and synthetic-only portfolio of Delo HDEO products. It may also help to explain why we now see some uncharacteristic discounting of HDEO by the big brands and justify concern among private label suppliers that the gains and momentum they enjoyed over the past few years in HDEO could decelerate.  

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: