As these demand shifts occur, there will be a greater need for higher viscosity index (VI) base oils. Consequently, Chevron’s move to produce Group III+ will enhance formulation flexibility for the company and its customers, allowing for a combination of Group II and Group III+ base oils.

It is also important to consider that the base oil market has seen significant arbitrage activity, with Group III being brought into the U.S. and other areas, primarily from Asia. Concurrently, Group II is being shipped to Europe, the Asia Pacific, and Latin America. Chevron’s recent announcement could also indicate how Group II facilities will adjust to the changing demand, especially concerning viscosity grade preferences and specific regional base oil needs.

Assuming most Group II producers can upgrade their production similarly to Chevron, North America may experience a reduction in its imports of Group III and III+ base oils. This situation underscores the worldwide dynamics of base oil supply and the potential implications of Chevron’s announcement on domestic and international base oil suppliers.

Steve Haffner, President of SGH Consulting, notes, “It is essential to recognize that not all base oils categorized within a specific API Group are the same. For example, Group III encompasses oils with a viscosity index (VI) of 120 or higher. Although technically there is no upper limit, base oils with a VI exceeding 130 are commonly referred to as “Group III+” in the market, allowing for significant formulation capability and flexibility. While both types fall under Group III, the market assigns a premium to Group III+ oils.”

It is still too soon to fully assess the consequences of the upcoming developments, including their impact on the yield of all products derived from the Group III+ output of the Pascagoula plant and potential changes in formulations, especially for SAE 0W-20. Haffner adds, “A typical GF-7 product is expected to satisfy requirements through a combination of Group II/II+ and Group III/III+ base oils, but the viscosity index will play a crucial role in determining the ratio of each type that can be used. For instance, GM’s dexos1 may require a greater proportion of high viscosity index Group III+ base oils. Furthermore, introducing a standard GF-7 product is generally easier than what is required for an OEM approved product such as GM dexos1, which requires a more complex program and significantly more costly investment for formal approval.”

Some within the lubricants sector contend that the changing demand for passenger car motor oils primarily drives the transition. However, this shift may also affect the pricing and availability of products vital for other lubricant categories.

Experienced professionals in the industry recognize that significant transformations rarely occur overnight, and we should not expect rapid adaptations from others in the market. But, this emerging trend deserves our focus, as it suggests that Chevron could be the first Group III+ base oil producer in the United States. However, it is crucial to acknowledge that our industry typically progresses slowly, suggesting that it may take years for this trend to be fully realized.