In the many decades I have been interested in engine oil, the industry has gone from deciding which base stocks could be called “synthetic,” to products requiring synthetics to meet original equipment manufacturer needs, to the sheer number of products that are available today.
My experience began as a do-it-yourself consumer until I became an industry expert as an engine oil formulator and marketer. Synthetics have been a special interest of mine. These products indicated premium protection and longer oil drains, which helped justify the higher price. They offered “insurance” that my engine would never need any major repairs with the right oil and regular oil changes.
My history started in the early 1970s when I started to drive and learned to do basic maintenance for family cars. As a young consumer, I was always aware of Mobil 1, which was introduced in 1973 in Europe and 1974 in the U.S., and I know some very loyal consumers. Amsoil was introduced in 1972, although I was not aware of that one until I was in the business, and it also has its loyal followers. Both offer superior benefits over conventional oils.
These original synthetics used a combination of polyalphaolefin and ester, and they dominated the market until the second half of the 1990s when other major brands started to introduce and market synthetic and innovative products of their own. In the 1990s, we saw new mid-tier products introduced such as part-synthetic or synthetic blends. These included Quaker State’s 4X4 and High Horsepower, followed by high-mileage oils like Valvoline Max Life, which introduced a new and successful tier of engine oil products.
These products built in performance via additives and base stocks. Fast forward to today and the market for synthetics and the number of products has grown significantly. As we look to the future, are synthetics being commoditized?
Lubes’n’Greases magazine and many of its contributors have discussed synthetics over the years. One key event is when Castrol entered the market using API Group III base stock in its top-tier full synthetic. Mobil contested Castrol’s ability to advertise Group III as synthetic and that only PAO and ester could be advertised as such. Mobil lost that case in 1998.
That opened the door for Group III to be introduced into both full and part synthetics. It took several years for Group III to really penetrate the market. SK was the first major Group III supplier appearing in the merchant market, followed by S-Oil, then Neste and more recently Motiva (Saudi Aramco), ADNOC, Bapco and others. Chevron and PetroCanada also produced Group III, but supply was low relative to some of the other Group IIIs.
This growing supply enabled OEMs to consider more widespread use and the introduction of SAE 0W-20 as a primary recommendation for its engines that require higher-quality base stocks. Around 2010, most of the applications that required Group III or PAO were very limited, and the majority was used to differentiate products and upsell consumers to higher-performing products. Through 2010, the number of synthetic marketers grew, with all branded products having offerings as well as some private labels, like Super Tech from Walmart.
Group III demand began to grow rapidly after 2010. Toyota and Honda made SAE 0W-20 their base requirement, GM introduced dexos1 and began to use 0W-20, and others followed. Dexos1 also replaced both GM’s conventional specification, GM6094M, and its high performance “Corvette” specification, GM4718M.
Once upon a time, GM4718M was a very high-performing specification that was originally designed around PAO and was difficult to achieve with Group III, so it very much differentiated full synthetic products. While dexos1 was a step up from the basic ILSAC specification, many enthusiasts felt it was a compromise against GM4718M. It also commoditized the specification within premium full synthetics, since all products meeting dexos1 could claim GM4718M.
“Dexos1 has become table stakes for SAE 0W-20 and 5W-30 full synthetics,” said Tom Glenn, president of Petroleum Trends International. “For SAE 0W-20, which requires all or mostly Group III and Group III+ base stock, most service providers want a one-size-fits-all product that meets dexos1 and GF-6. This is needed for bulk tanks to service all vehicles needing SAE 0W-20.”
It should be noted that the one exception concerns dealers, such as Toyota and Honda, who do not service GM vehicles and hence can use a product not bearing the dexos1 approval. This means that essentially all premium products in North America met dexos1 and are widely available in both branded and private label full synthetics. These are still special but are harder for branded marketers to differentiate because they all meet the same specifications and can claim GM4718M. Demand for these products has grown and today represent more than 30% of the market, factoring in all the SAE 0W-20 oils sold today.
While full synthetics are still very premium, it has become harder to differentiate and/or understand the added benefits of products called synthetic blend and part-synthetic versus conventional products.
Many conventional products are now called synthetic blend because they require some higher viscosity index base stocks to meet cold crank and Noack volatility requirements. Once upon a time, part-synthetic products contained as much as 30% synthetic base stock. Over time, the amount of synthetic material was reduced to where a synthetic blend could contain as little as 1% Group III—and very few used PAO!
Products that contained Group II+ to meet the basic specifications versus a lesser amount of Group III also began to be marketed as part synthetic. Some may say Group II+ is not synthetic, so how can that be? Group III is defined as at least 120 VI. A Group II+ base stock approaching 120 VI contains some percentage of Group III.
“Technically we can consider that hydroprocessed base stocks produce a distribution of different VI molecules through primarily the hydrocracking unit,” Brent Lok, retired base stock expert, said. “The VI we measure of the finished base oil is a weighted average of lower VI and higher VI components. If the VI of the base oil is 100 VI, there are negligible quantities of components greater than 120 VI. But if the base oil is a Group II+ at an average VI of 117, then a very significant portion of its molecules are at 120 VI or greater. Correspondingly, a Group III base oil at 123 VI will contain significant quantities of molecules in the 115-120 VI range. Given the significant overlap in most Group II+ and Group III base stocks today, the use of a 120 VI cutoff has become arbitrary now.”
He added that in 1994 when the base oil group definitions were established, the two commercial Group IIs were 90 VI (Sun-Yabacoa) and 95 VI (CVX-Richmond). The two commercial Group IIIs that existed were at 125 VI (BP) and 140 VI (Shell), so the 120 VI definition was reasonable at the time. Rerefined oil also contains steams of mostly Group II/III base stocks, so it can also be considered for synthetic blend claims.
“As you go higher and higher in VI, both the VI distribution and distillation range get narrower and narrower. PAO has very narrow distributions in VI and distillation in its processing compared to Group II or Group III,” Lok said.
Some readers may note that there are some SAE 0W-20s that are considered synthetic blend, but technically it is well known that approvals contain all or mostly Group III and some Group III+ to meet dexos1. In this case, the marketer may be trying to distinguish between a basic SAE 0W-20 meeting ILSAC standards and one meeting ILSAC and dexos1 to differentiate price. It should be noted there are many ways to formulate, so there is potential for more Group II+ in SAE 0W-20.
Another group of very premium products in North America are ones that meet key specifications for European OEMs. These products are more widely sold in Europe for vehicles such as Daimler, BMW and VW. European specifications are very demanding and have long required premium base stocks and lower volatility than ILSAC oils. Like North America, European OEMs have also moved to lower-viscosity products such as 0W-20 and 0W-30 that represent a growing share of the European engine oil market. These products should remain very premium and fill a niche subset of the North American market, which has about 9%-10% of European-brand cars, and at least half require these special premium products whether they are marketed as fully synthetic or not.
As we move to the future—let’s say 10 years from now—will full synthetics be most of the products sold in North America, and will current product tiering look very different? Will new ultra-premium products like Shell Ultra Platinum or Mobil 1 Extended Performance represent higher performance? Performance beyond full synthetic may be defined by marketers who can exceed standard engine tests or via unique engine and field testing, such as the new Valvoline Restore & Protect product.
It is expected that conventional products like SAE 5W-20 and 5W-30 will decline. SAE 10W-30 and 10W-40 will be hard to find, and SAE 0W-20 will represent over 50% of all oil sold. Combine that with the portion of the car parc that requires full synthetic and more than 70% of the lubricants needed may require full synthetic premium oils just to meet basic requirements of the 2032 car parc.
The need for conventional oil versus some type of synthetic will not have much meaning to service providers or consumers when the basic vehicle needs an SAE 0W-20 or a product that must use base stocks that just happen to be called synthetic. “Synthetic” is more of a marketing term and does not define technical performance; performance is defined by meeting key performance specifications.
My belief is that we have many creative marketers and engineers who will find a way to differentiate their full synthetic engine oils, but the “synthetic” term will have little meaning and therefore will be commoditized by being the most widely needed tier of oil in the market. We still may use the term to differentiate largely on price, but if all available products are synthetic blends or full synthetics, will the word synthetic carry the same value as it does now?
Unless the synthetic blend products contain premium approvals, their applications may be very limited and used mainly for older vehicles and those out of warranty. This is especially true for 5W-20 and 5W-30 oils, which clearly have distinct tiers today. SAE 0W-20 is tougher to predict because of its base stock appetite, but one day we may have two bulk tanks at service providers both containing 0W-20—one good for all cars not requiring dexos1 or a premium European OEM specification and one that can meet the most demanding OEM specifications. Time will tell.
It is not easy to predict the future, but it is probably not too early for the market to consider what base stocks will be needed and how to market products going forward. How will the additive marketers deal with this besides creating more flexible base oil interchange rules (BOI)?
Many top tier products do not have any formulation flexibility to meet approvals for dexos1—Daimler, BMW and VW, for example—so BOI may not help. Each formulation must be approved by the OEM and no changes are allowed; each program can get very expensive. A basic core program to meet ILSAC claims only costs around $300,000, and subsequent approvals are mostly well under $100,000 for first-time engine passes. But adding dexos1, EU approvals, etc. can add millions of dollars to investments and take one to several years to be completed and fully approved.
In sum, there are lots of moving targets. But as it has done in the past, the industry will be creative and adjust to a new normal!
Steve Haffner is president of SGH Consulting LLC. He has over 40 years of experience in the chemical industry, primarily with Exxon Chemicals Paramins and Infineum USA. Contact him at sghaffn2015@gmail.com or 908-672-8012.