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Lubricant Prices Rising
May 27, 2022
Written By Adam Buckallew
There are many reasons why lubricant prices have increased dramatically since 2021 and are projected to remain high. A series of events that began with the pandemic and continued with the Russian invasion of Ukraine has snarled production, depleted inventories, and disrupted the labor market in such a way that our surprisingly fragile supply chains have been unable to keep up with demand.
When the lockdowns and pandemic restrictions lifted across the United States, pent-up demand triggered skyrocketing pressure on raw materials and finished goods. The surge in demand combined with product shortages created roaring inflationary pressure across the globe. The latest U.S. Consumer Price Index figures show inflation accelerated to an 8.3% annual rate in April – close to a 40-year high.
A scarcity of base oils, a key ingredient in the manufacture of lubricating greases, motor oils and other fluids, has been a significant challenge. Crude oil pricing is one of the primary factors that drive base oil pricing, and soaring crude oil and fuel prices have hit the lubricant and grease market especially hard. Some lubricant manufacturers have increased their prices 12 times in the last two years. For perspective, base oil prices from 2010 to 2020 averaged two price increases per year, according to data from Jobbers World.
In June, many major lubricant providers plan a fresh wave of price increases by 20-30 cents per gallon. When announcing its latest pricing adjustments, German-based oil refiner Avista Oil said its latest price increases were due to “unprecedented cost inflation to source feedstock and producer base oils, coupled with very firm demand and tight inventories.”
At the moment, MFA Oil does not plan further price increases on its grease and lubricant products. However, the extreme volatility in the market makes it challenging to forecast pricing on a short-term and long-term basis.
The ongoing Russian invasion of Ukraine has prompted steep and sudden jumps in energy prices, especially after countries such as the United States announced bans on importing Russian crude, natural gas and coal. Until the conflict ends, crude oil availability and pricing – and by extension, the lubricant market – will continue to be influenced by the uncertainty of war.