Chevron sent letters out to its marketers on
September 20th advising that is was postponing it’s
previously announced general price increase of
October 2, 2006. The change moved the effective
date of the increase to November 1, 2006. It added
that the amounts of the increase will be as
previously announced.
Hmmm... what might they be thinking?
Whatever it is, here we are one week later and
ConocoPhillips might be thinking the same thing.
They sent a letter to their marketers yesterday that
for all intents and
purposes looks just like the letter Chevron sent to its
marketers on September 20th. ConocoPhillips' letter
reportedly advises its marketers that it is delaying
the effective date of its previously announced price
increase of October 9, 2006. The new effective date
will be November 1, 2006 and they too said the
increase amount remains unchanged.
Although Jobbers World will likely never know what
really happened behind close doors to prompt these
rather interesting letter to be penned, a number of
our sources say its about the price of crude and
marketer pushback.
Just in case you have been sleeping for the last two
months, take a look at the link at the end of this
story to see what's
been happening with the price of crude. Whereas in
July there were many who believed the price of crude
might reach $80 a barrel, today they are wondering if
crude will dip below $60 a barrel.
So what do you do if you are major that recently
pushed through a price increase based on what had
been the steep rise in the price of crude? What do
those majors
do when they know their marketers are now seeing
the price of diesel and gasoline dropping like a rock in
response to today's lower price of crude. And what
do those majors say when their marketers start
pounding them with questions (including some very
heated ones at a recent marketer's meeting) that
ask, "how is it that the price of lubricants is
tied to the price of crude when the price of crude
goes up, but isn't when the price of crude goes
down?" What do the majors say?
And it's not just the marketers that want to
understand what drives lubricant prices. The
marketer's customers are also asking the marketers
the same questions. And why shouldn't they. Think
about it, the marketer went in there last month and
told them there would be a general price increase
due to the escalating price of crude. Maybe they
even showed them the price increase letter from the
major(s) they buy from. Yep, you guessed it. That
end
user is now asking the marketer if there will be a
price decrease due to the precipitous drop in the
price of crude.
So what does the marketer tell its customers when
they ask them the tough questions about the most
recent round of price increases and falling price of
crude?
Fortunately for those selling Chevron and
ConocoPhillips, they can now say the price increase
will be delayed. Maybe they can tell their
customers the beleive the delay is due to volatility in
the crude
market and the price increases might be revisited in a
month or so based on what crude does. Or do
they say nothing becuase the end user has already
accepted the price increase.
But what about other marketers? What do they
tell their customers about the most recent round of
price increases and price of crude. Do they default
back to the story about how there is a lag time
between what happends with the price of crude and
lubes that makes it different
from the price of fuel and crude? Or does they sales
rep say "you
can't peg lube price to fuel due to a statistically
variable phenomenon unique to internal rate of
returns associated with the impact the
obliquity of the angle of the earth axis has on the
solar ecliptic and
because of this the relationship of lube prices to
crude differences is sigmoid and that's why I got go
to my next appointment - c-ya!"
Regardless of what they tell them, you can be sure
the questions will keep coming. And maybe that's
why we now see these delays in Chevron and
ConocoPhillips price increases. Maybe they, and
others will need some time to look for answers, or for
the price of crude to go back up.
