Why are fuel and lubricant prices rising so fast?

Fuel and lubricant prices are rising fast. They are growing at a rate we haven’t seen in years. Earlier this month, the national average of gasoline hit the record high at $4.104 gallons, beating the previous record from 2008 during the height of the Great Recession. These rising prices are very concerning because there is a new record high or a new reason why prices continue to climb every day. Oil and fuel prices have always ridden a wild rollercoaster of ups and downs, but lately, the ride is on a breakneck speed upward with no hope of stopping.

As a fuel and lubricant supplier, we want you to know that we are doing our best to help our customers through these challenging times. One of the ways we are doing that is by keeping a close eye on the situation and communicating why these changes continue to happen. As a result, you can expect us to stay ahead of the curve as we carefully watch the changing oil and fuel markets across the globe. Then we will do our best to communicate developments as we see them unfold so that you can plan for business.

Expect high fuel prices to last
First, let’s talk about fuel prices. We all know that costs are at record highs and climbing. The record-breaking fuel price high earlier this month on March 7 is just one of the latest fuel records to break. The national average cost of gasoline recently saw its largest 7-day price spike. Moreover, the ongoing conflict in Russia and other world events will continue to affect price increases.

According to Patrick De Haan, head of petroleum analysis at GasBuddy: “Americans have never seen gasoline prices this high, nor have we seen price increases so fast and furious. That combination makes this situation all the more remarkable and intense, with crippling sanctions on Russia curbing their flow of oil, leading to the massive spike in the price of all fuels: gasoline, diesel, jet fuel, and more. It’s a dire situation and won’t improve any time soon. The high prices are likely to stick around for not days or weeks like they did in 2008 but months. GasBuddy now expects the yearly national average to rise to its highest ever recorded.”

Lubricant prices are going up amid supply issues
Rising fuel prices are not the only thing business owners have to contend with; lubricant prices and availability are also becoming a problem. The increased cost of raw materials, transportation, and availability of base oils contribute to higher lubricant prices and increased scarcity of some products. One of the most significant issues facing lubricant manufacturers is the availability of additives and components, making blending finished products difficult. These disruptions are causing some manufacturers to phase out specific products or leading to long wait times for orders. In addition, many distributors struggle to find some lubricant supplies, and when they do, the prices are often higher. As a result, major manufacturers have announced price increases, including ExxonMobil, Excel Paralubes, and Chevron.

One reason manufacturers are implementing price increases is the rising cost of base oil supplies. Base oil prices have increased twice this year alone. In addition, ExxonMobil announced a $ 0.30-gallon price increase effective March 14. Demand for base oil remains high as these supplies are essential for the production of lubricant supplies and additives. Base oil prices are also strongly influenced by diesel oil prices which are also rising rapidly to record heights. Distributors expect that this situation will continue for the time being, and high prices and shortages may last for months.

Oil prices are the culprit
Most fuel and lubricant suppliers knew that prices would rise as we came out of the COVID-19 pandemic and demand increased. But the record-setting highs we’ve seen are more than anyone imagined. Now, the Russia-Ukraine war is further complicating things, as countries worldwide impose economic sanctions on Russia and their oil supplies.

Crude oil is always the driving factor behind fuel and lubricant price increases. If the oil price goes up, you can expect to be paying more at the pump. In early 2022, crude oil prices were high, around $79 a barrel in January, but as the year progressed, demand increased. But as the conflict in Ukraine escalated into a full-out war, prices rose dramatically. As of February 4, oil was around $90 a barrel. It remains to be seen exactly how the fallout of the Russian-Ukraine war will affect oil prices worldwide. We expect that prices will continue to increase. Russia produces 10% of the world’s oil supply and is also a key member of OPEC+. Sanctions against the country and its oil supplies could have significant consequences.

The record high price of oil also comes when there is low supply in the market. OPEC+ has missed output targets, and there is significant slow growth in oil production worldwide. This low supply combined with increased demand as the world recovers from the COVID-19 pandemic is cause for concern. According to the International Energy Agency, global oil demand is expected to reach 100.6 million barrels a day in the coming year.

How to offset fuel price increases
As your fuel and lubricant supplier, we know that these prices increases are not easy. Everything is getting more expensive as inflation costs rise, and your profit margins will pay the price. We want you to know that we are here for you. Here are a few programs we offer that may help reduce your fuel budget and needs.

  • Fleet Fueling Program: We offer an extensive fleet fueling program that may significantly reduce fuel costs and helps you closely monitor your consumption. Using our program, you can supply your drivers with fleet fueling cards that are easy to monitor. They will have access to a nationwide network of 24-hour card lock fuelling sites, and you’ll have itemized accounting of all your fuel costs. This program also has several safeguards to prevent fraud and fuel theft!
  • Oil Analysis: Rising lubricant costs and supply scarcity mean that it may be more difficult in the coming months to get the lubricant supplies you need. Our oil analysis program can help. Our lab will provide custom lubricant recommendations and equipment analysis using the data gathered from your oil samples. These findings can help you take preventative measures to prevent costly maintenance and lower your overall lubricant costs.
  • Bulk Fuel Delivery and Remote Tank Monitoring: You can also offset the rising cost of fuel by buying in bulk and storing your fuel onsite. We also offer remote tank monitoring services to ensure that your bulk fuel supplies are protected from theft. Our remote monitoring tools can also help you monitor your usage so you can strategically time when you buy your next load of fuel when prices may be lower.

There is a lot out of our control in the fuel and lubricant world right now. Like you, we watch the changing developments with trepidation and hope for the best. If you have any questions about our high quality fuel and lubricants, call us today.