For Those Keeping Count
The past two years have been extraordinary. From January 2021 to date, there have been 11 lubricant price increases. Eight of the increases came in 2021, and there have already been 3 that have taken effect in 2022 and some have announced a 4th. To put this in perspective, consider that from 2013 to 2019 there were a total of 12 increases; an average of less than 2 a year.
In addition to the record-breaking number of increases, the magnitude of the adjustments seen since the start of 2021 is also remarkable. Where price increase announcements historically range from 6 to 8% over the 10 years prior to the pandemic, and a few percentage points lower in prior decades, the eight increases announced in 2021 averaged approximately 14% each. And in 2022, the average of the first three rounds of price increase is just over 15%. Particularly notable was the second increase announced in 2022 when most were in the range of 15 to 25%.
The rapid fire of price increases seen since 2021 were in response to the ongoing increases in the cost for raw materials (base oils, additives), significant increases in the cost of packaging and freight, and supply chain disruptions.
It takes little more than a look at the number and magnitude of increases in the posted price of base oils in 2022 to understand that the cost pressures have not let up and to appreciate the cost burden lubricant blenders and marketers have been working with this year. As shown below, base oil increases have been coming at a rate of about one every month.
The number and magnitude of lubricant additive price increases already seen in 2022 have also been notable. Where there are typically 1 to 2 additive increases seen in a year, three have already 3 announced by Afton and Infineum this year.
In addition to the continuing increases seen in the cost of base oil and additives, blenders are also battling with significantly higher transportation and freight costs due to skyrocketing fuel prices, driver wages, and rail rates. And on top of this, the price of drums, totes, pails, bottles, pallets, dunnage, and other materials continue to escalate.
So, the question for most in the industry is not why are lubricant prices increasing so rapidly, instead, it’s when will the market settle down?