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No Surprise - When Costs Increase, so do Prices

We are now looking at what clearly appears to be an unprecedented 4th round of finished lubricant price increase announcements within the first six months of a year. The first round was seen in January 2011 when both majors and independent lubricant manufacturers increased prices by roughly $0.40 a gallon. This was quickly followed by a second and larger increase in March 2011 of close to $0.60 a gallon.  And as shown below, the increases didn't stop there. The majors and independent lubricant manufacturers have already had three price increases and the independents are now into their 4th round, with many set to take effect at the end of this month and the beginning of the next. Click here for details.

When taken together, the price increase marketers have already seen from the independent lubricant manufacturers in 2011 adds close to $1.90 a gallon to the price of lubricants. And although the majors have not announced a 4th round of increases, if recent history repeats itself, it will likely be about 30 days after the independent blenders announced before letters from the majors are in the mail.

So why so many price increases, what's driving it? The simple answer is to repeat the language used with regularity in the price increase letters that marketers receive. In some form or another, these letters seem to always say, "This increase is necessary due to the increases in base oil, additives, packaging, and transportation costs..." Needless to say, one can easily become jaded to this justification because it has become not much more than boiler plate in price increase letters.  At the same time, how much more can one say? The price of lubricants is driven primarily by the cost of base oil and additives, and when the price of these raw materials goes up, so will the price of lubricants.

And there is no question about it; the price of base oil has increased significantly since the start of the year. Whereas the spot price for a medium viscosity Group II base oil was close to $3.65 a gallon at the start of the year, today, that same juice costs blenders about $4.80 a gallon. This represents an increase in the price of base oils alone of $1.15 a gallon.

In addition to base oil price increases, there have been three lubricant additive price increases since the start of the year, 8%, 8%, and most recently 10%. Whereas these increases differ by manufacturer, and in some cases additive type, they generally moved prices up an additional $0.42 to $0.65 for the DI and another $0.12 to $0.18 for the VII for passenger car engine oil since the start of the year.

When you take net additive treat costs into consideration, variations in treat rates and differences in base oil costs, and then add it all up, it becomes clear that the price increases in finished lubricants already seen in 2011 are commensurate with the higher cost of goods. And this does not even include the higher cost of packaging, transportation, labor, and others that go into making and delivering product. With this in mind, it's not hard to understand why the 4^th round of finished lubricant price increases moved the needle up close to $1.90 a gallon so far this year. Because when costs go up, so do prices.

Posted June 17, 2011 

Gulf Hydrocarbon, Inc.

       - Outside Sales Representative, Territory: Louisiana and East Texas

       - Outside Sales Representative, Territory: Southern Illinois and Western Missouri

Gulf Hydrocarbon, Inc. is the premier provider of biodiesel to the petroleum industry.  We are seeking to fill two territory sales positions.

Responsibilities include maintaining contact with all biodiesel customers, locating new customers.  In addition, outside sales representatives will negotiate and manage all contract and spot sales of biodiesel out of terminals and refineries.  Summarize and analyze supply economics for posted price, spot and long term sales.

This position can be entry level (with college degree) or can utilize experience in sales, marketing, petroleum transportation or logistics as well as some accounting knowledge. 

The pay is a salary plus performance bonus, car and communications allowance.  The company provides a 401K plan with company match.  Health care option provided.

Qualified candidates may submit resume to: career@gulfhydrocarbon.com AA/EOE

Posted June 3, 2011 

Thomas Petroleum  

• Chemical Sales position in the North Louisiana market
• Sales position in the Corpus Christi, TX market

Thomas Petroleum, one of the nations leading Chevron distributors for 15 years and Huntsman Chemical's preferred distributor is seeking highly motivated and creative sales candidates. We are seeking to fill a Chemical Sales position in the North Louisiana market. This individual is responsible for outside Chemical Sales/Service to natural gas markets utilizing chemical processes and products (TEG, DEA, MDEA, etc). Additionally, we have a Rig Sales position in the Corpus Christi, TX market. This individual is responsible for petroleum and fuel sales to our oilfield based business.

These jobs require some travel and participation in an on-call rotation. We offer an excellent salary package including attainable bonus opportunities, insurance, 401k, vehicle allowance and more. Qualified candidates may submit resume to: mmartino@clthomas.com. AA/EOE.

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Posted June 9, 2011

Lubricating Specialties Company

• Lubricants and Fluids Sales position in the Greater Los Angeles California market

Lubricating Specialties Company a well-established, leading blender and packager of oils, greases and industrial fluids on the West Coast, is seeking highly motivated and creative sales candidate.  LSC is seeking to fill a Territory Sales Manager position in the Los Angeles area. The successful candidate will be responsible for outside oil, grease and industrial fluid sales to an existing base of independent Jobbers. Duties will also include expanding the current customer base by adding new accounts and expanding product offerings in those accounts.

LSC offers an excellent salary package including commission, health insurance, 401k, fuel and cell phone reimbursement. AA/EOE. Qualified candidates may submit resume to: acastillo@lubespecialties.com