September 28, 2006

Jobbers World Online News Briefs is a service to Subscribers to the Jobbers World Newsletter.

In this Issue of Jobbers World Online News Briefs
  • Chevron Postpones Price Increases and ConocoPhillips Follows
  • Shell Announces Price Increase

  • Chevron Postpones Price Increases and ConocoPhillips Follows

    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.

    Shell Announces Price Increase

    Jobbers World has received many calls over the past few weeks and a good deal were the same. That question being, "have you heard anything about Shell increasing its prices." Marketers were asking this because with the exception of Shell and Valvoline, the other majors and many independent lubricant manufacturers pushed through a price increase over the last 30 days. Well Shell joined the crowd late last week.

    Shell Lubricants will increase prices, with an effective date of October 30, 2006. The increases ushers in a 2-5% for Consumer products, a 2-7% for Transport and Industry products, and a 7% increase for Car Care Brake and Power Steering Fluids

    Food for thought: After reading the first story in this issue of JobbersWorld about delays in price increases and now this one about Shell announcing a October 30th price increase, one has to be thinking about the strategies and tactics of first movers and how the the dynamics of competitive response will play out over the next few weeks.


    Please Support our Sponsors

    Lubricant Market Research

    Join our mailing list!

    Email Marketing by