Elephants in the Room
Rising crude oil inventories, lower than expected economic growth in China, the eurozone debt crisis, geopolitical uncertainties in the Middle East, disappointing job numbers in the US, and other macro and microeconomic issues have battered crude oil price over the past few months. In fact, for the first time in seven months, the price of WTI fell below $100 a barrel and Brent also took a beating. So where does it go from here?
Whereas JobbersWorld is certainly no authority on the price of crude, nor have we been gifted with any divine vision about what’s to come, we do have a clear line of site as to where we are and what many in the industry are thinking.
As to where we are, in short, the price of crude was relatively stable in the last quarter of 2011 and first quarter of 2012; then it ramped up in the second quarter of 2012. This resulted in a bump in the price of base oil and consequently the price of finished lubricants in the second quarter of 2012. But just when most expected finished lubricant price increases would be announced in response to the rising price of crude and base oil, the floor started to breakaway on the price of crude.
This leaves us with an elephant in the room, or maybe two. One being about how sticky the most recent round of finished lubricant price increases will be shall crude continue to fall. But, the second elephant in the room is arguably the largest. This is the elephant that many consider the matriarch, the one that has historically lead the charge. To the surprise of many, beyond not leading the charge in this most recent round of price increases, this elephant has yet to move when all the others have.
One has to wonder, is this elephant smarter, does it have a better memory about the ups and downs in crude, base oil, and lube pricing, or is there another matriarch in the making?