JobbersWorld is a Petroleum Trends International, Inc. Publication
JobbersWorld is a Petroleum Trends International, Inc. Publication

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The Price Increase Quandary

The nearly back-to-back increases in base oil prices over the last few weeks have put many lubricant manufacturers in a pricing quandary. This is because most announced lubricant price increases over the past two weeks and they based the increases, in a large part, on increases in the price of base oil prior to the last few weeks of announced base oil increases (i.e. ExxonMobil’s increase in posting announced on 4/22/2019). So here they are, moving to implement their first round of increases in 2019, and while doing so, their cost of goods moved up one or two more notches.

Unlike fuel, where there is a high level of price transparency and consumers are accustomed to, and expect to see, daily fluctuations at the pumps, it’s not like that with lubricants. For a number of good and complex reasons, it takes time to implement price changes in the lubricants business. Because of this, lubricant manufacturers and their marketers now face a limited number of paths forward, including:

  • Move forward with the previously announced increase and accept thinner margins by absorbing higher base oil prices rather than knocking on their customers doors with another price increase before the ink on the last is dry
  • Rescind/revise the recently announced increase and reissue with adjustments for the most recent base oil increases
  • Move forward with the most recently announced increase and push through another increase shortly after

Although there is limited history to turn to in the lubricant business where there was a rapid run up in the price of base oil, the actions taken when it has occurred suggest revisions/adjustments will be made shortly to the most recent round of lubricant price increases. It should be an interesting week ahead. And it could get even more interesting if the industry sees an increase in the price of additives, and/or if the price of base oil fluctuates significantly in response to current market dynamics in Europe and Russia.

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