As with most lubricant price increase announcements seen in the past, nearly all the notifications marketers received this year attributed the need for the increase to the higher cost of the raw materials used in the manufacture of lubricants. Some are even more specific by citing the rising costs of base oils, additives, packaging, and other inputs.

In some respects, much of the language in price increase notifications is so familiar that it can easily be glossed over as being no more than boilerplate leading to the amount of the increase and its effective date. But, with four lubricant price increases already behind us and another round congealing to take effect early next month, it’s important to take a closer look at the words that justify price increases.

The first and most commonly cited reason for lubricant price increases is the higher cost of base oil. As most are aware, changes in base oil prices can have a significant impact on the cost of goods sold in the lubricants business. And with five significant base oil price increases occurring over the past six months, it’s understandable that base oil has been a dominate driver behind the lubricant price increases seen in 2021.

Similarly, the cost of additives also has a significant impact on the cost of goods. Where it’s relatively common to see one lubricant additive price increase a year, there was one round of additive increases announced late December/early January 2021 and another in the second half of March. Both increases were in the range of 8% and they clearly contributed to the escalating price of finished lubricants. In addition, many blenders are challenged to secure supply of PCMO, HDEO and THF additives and this too impacts costs.

But what about the words “other inputs” so often seen in the justification for price increase notifications, are these real? In short, they are real and they are big.

Some of the increases in the rising cost of “other inputs” include:

Bottle, jug, and tote prices have increased significantly in 2021 and some are on allocation

• Jug prices up $0.10 in 2021
• Pail prices increased by $0.25 two weeks ago and up close to $0.45 a pail since the 4Q2020
• New one-way totes are up $15 to $20 since the start of the year

New drum prices up from $25 to over 40 in just over 6 months, and they are challenging to source 

Pallet prices hit record highs in 2021 and supply is struggling to keep pace with demand. Marketers report pallet prices are up close to 50% year to date.

Freight costs are up 30 to 40% over last year and it’s very difficult to secure bulk truck carriers

The shortage of CDL drivers continues to push wages up and availability of drivers down  

In addition to higher costs in these areas, blenders and marketers are seeing higher costs for insurance, maintenance, wages, fuel, and others. And by the time this story is published, there will likely have been more increases in these and other areas.