Five lubricant price increases in the first five months of 2021. This is unheard of. You may wonder “what is going and why is this happening?” Let us try to help you better understand the drivers behind the rising costs of finished lubricants.

Previously, most lubricant price increase announcements attribute rising prices to the higher cost of raw materials. Some even citing rising costs of base oils, additives, packaging, and other inputs.

At a quick glance, that is what seems to be the cause in yet another price increase. However, as we are on the fifth increase of the year, its important to take a closer look and justify the reasons behind these price increases.

First, to understand the explanations for the rising costs, it’s important to know the components that make up a finished lubricant product. A finished lubricant product is made up of base oils, additives, packaging, and other components (such as import duties, freight, and manufacturing costs).

Unfortunately, there has been an upward trend in all cost components, especially in the second half of 2020. However, the main driver behind the lubricant price increases is the higher cost of base oil. As you may be aware, changes in base oil prices can have a significant impact on the cost of goods sold in the lubricants business. Unfortunately, base oil prices continue to rise driven by extremely limited supply against healthy demand, reduced refinery run rates, soaring spot prices and firm crude oil and feedstock values. Click here for full details of the US Base Oil Price Report.

In addition, the cost of additives also has a significant impact on the cost of manufactured goods. Typically, we see one additive increase per year; but have already seen one round of additive increases late December/early January 2021 and another in the latter part of March. Both increases were approximately 8% and contributed to the rising cost of finished lubricants. Many blenders have also been challenged to secure supply of PCMO, HDEO and THF additives.

But what does “other components or inputs” even mean? Do they matter? The answer is yes.

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

  • 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 Q4 2020.
  • 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.
  • 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.

Please click here to see more detailed documentation on the reasons behind the five lubricant price increases in the last five months.

Greg’s Petroleum Service continues to work hard to control costs and deliver quality products and valuable service at competitive prices. Unfortunately, we must advise all customers and our community that the industry will be experiencing prices increases and they will affect all brands throughout the industry.

We regret having to pass this increase on to you. As a valued customer, please know we have only increased our lubricant pries due to the direct supplier increases we have received. We greatly appreciate your continued business and partnership. For questions on this price increase, please contact your Greg’s Petroleum Service sales rep today.