Lubricant price increase also in Europe soon?

In the lubricant business, as fluctuations in the price of crude oil has an impact on downstream products, managing price increases can be very challenging.

Lubricant price increases typically track significant movements in base oil prices. This is understandable since base oil accounts for 80 to 99% of most finished lubricant volume.

Crude oil prices are one of the primary factors driving base oil prices and the reasons for fluctuations in the price of crude, and therefore base oil, are many. They include OPEC pricing, global supply and demand, geopolitical unrest, natural disasters, production costs and storage capacity, and others. Last year, the lock downs and travel restriction brought the economy to a near standstill and lubricant demand took a significant hit.

At the start of 2020, most finished lubricant suppliers announced increases scheduled to take effect at the end of February/beginning of March. These increases came in response to rising crude oil prices and a bump in the price of base oil. When the COVID hit, base oil prices retreated, and the finished lubricant increases announced at the start of the year were in some cases pulled back.

Following its low at the end of April, crude began an upward climb and this triggered increases in the price of base oil. 2020 ended and 2021 began with nearly all major and independent lubricant manufacturers in North and South America announcing price increases. Most of the increases were in the range of 10 to 15% with effective dates in the second half of January.

The need for the adjustments were primarily attributed to higher base oil price per gallon hikes occurring in December 2020, as well as increases in the cost of nearly all other raw materials used in the blending and packaging of lubricants. These include plastic resin, corrugated, as well as higher transportation and manufacturing costs.

When you consider that the price, customers were paying most of last year for lubricants was tied to base oil prices when crude was roughly $15.00 a barrel, the recent round of finished lubricant price increases in North and South America comes as no surprise, now that the barrel price has increased to $64.67 today.

Europe strives to be the champion of straight forward communication and playing with open cards. Why is then the lubricant industry waiting for so long to admit the unavoidable?