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August 23, 2011     

JOBBERSWORLD...MARKET INTELLIGENCE FOR INTELLIGENT MARKETERS...  The First and Only Independent Newsletter to Focus on Lubricant Distributors.


    

CLICK HERE FOR JOBBERSWORLD ARCHIVES  

 

For the Sake of Completeness - Castrol Industrial, Petro-Canada and EcoPower Also Increased Prices

Whereas JobbersWorld previously reported Castrol Automotive announced a price increase, it should be noted that Castrol Industrial also advised its marketers of a price increase of 8% on all industrial lubricants. This increase is effective September 1, 2011. Castrol Industrial says the increase is necessary due to the rising price of base oils driven by increases in the price of crude and imbalance between supply and demand. In addition, they say, higher costs for chemicals and additives, freight, packaging and others contribute to their need to increase lubricant prices.

 

Petro-Canada advised its distributors in the US it will increase the price of its lubricants by 6%. This increase takes effect September 8, 2011. It should be noted, however, this increase does not include Purity FG White Oils and Process Oils (Paraflex).

 

Safety-Kleen announced it will increase the price of all EcoPower Products by $0.30 a gallon. This increase is effective September 1, 2011. In addition, Safety-Kleen announced it plans to incorporate fuel surcharges in its delivery price.

 

Click here for the current tally of Round 4 Price Increases 

 
Elephants in the Room
Make no mistake about it, there are some elephants in the room... but while some might look the other way, many marketers and independent lubricant manufacturers are not.

The first elephant in the room JobbersWorld is hearing about is the justification blenders are giving for their fourth round of price increases. In one way or another, the letters marketers received about these increases say, "given the continued increases in the price of base oil and additives"... we will increase the price of lubricants by x% effective x date.

The elephant in this room... the price of crude continues to drop and there has been little to no movement in the price of base oils over the last few months. In fact, as shown below, the gap between the price of crude oil and base oil has been increasing.



Now for a closer look...

As shown below, there have been four rounds of finished lubricant price increases so far this year. Whereas the first two can clearly be tied to increases in the price of crude oil and consequently, base oil, the third is a bit more challenging to connect. But it's the forth that many marketers are now questioning. And to cut to the chase, what they are asking is, "how can you attribute the forth increase in finished lubricant prices to higher base oil prices when the price of base oil has been static for a few months, and the price of crude has been dropping?



But the chart above only shows the price of API 100N Group II. Another consideration is that not all engine oils (and others) are blended with only API Group II base oils. In fact, to produce an API SN ILSAC GF-5 engine oil, a blender must use some Group II+ and/or Group III.

With that in mind, one has to look at how the cost of Group II+ and III has changed in 2011 to better understand the fourth round of price increases. But even that makes Round 4 hard to understand.

As shown below, whereas there was a ramp up in the price of these API type base oils from the beginning of 2011 to mid-year, base oil prices have been relatively flat in the past few months. So, in the minds of marketers, the question remains, "how is it that the fourth round of price increases is attributed to the higher cost of base oils when the price of base oil has not changed over the past few months, and the price of crude (base oil feed) has been dropping?"



So how does the spread for diesel, gasoline and base oil look when compared to crude?

Consistent with concerns voiced by marketers about the fourth round of price increases being driven by the higher price of crude, as shown below by the crude oil spreads, base oil spreads ramped up in the second half of the year.



Although the refining and market(ing) issues impacting the price of fuels and base oils have differences, it's important to examine how the price of base oil tracks crude as compared to such other refined products as diesel fuel and gasoline. As shown below, whereas the trend lines for the crude spreads for diesel and gasoline in 2011 have increased modestly, the trend line for base oils is more pronounced.




Now for the second elephant in the room many are talking to JobbersWorld about.

JobbersWorld continues to hear words of concern from lubricant marketers and independent blenders asking about the time lag between when independent lubricant manufacturers and the majors move prices. As shown below, the time between the two continues to stretch.

   

   

 

 

 

Let us know what you think about the elephants in the room!

Feedback will be reported only in aggregate form in a manner that does not identify sources.

 

Email your comments to

tom_glenn@jobbersworld.com 

 

 

Business Opportunities

   

Blue Mountain Professional features a complete line of vehicle maintenance products for the professional installer. We are seeking additional distributors to sell one of the fastest growing automotive lines in the industry. For information regarding this exciting opportunity please contact Chris Alexander at Old World Industries, LLC - 800-323-5440.   

 

 

 

Select Distributor Opportunities for Service Pro and Purus Products

The Association of Independent Oil Distributors (AIOD), North America's first and largest buying group of independent lubricant wholesalers is seeking additional distribution for its Service Pro automotive and Purus commercial brands in select US and Canadian market areas. For distributor information contact AIOD at 970-249-6336, via email at aiod@newwestmarketing.com or visit the web at www.service-pro.com and www.purusproducts.com    

  

 

Join United Petroleum Company's Rapidly Expanding Distributor Alliance Network

 

United Petroleum Company is currently establishing EXCLUSIVE distribution territories with select marketers to represent its Quantum and Infinity lubricant brands throughout the United States.  In addition to a diverse line of high-quality automotive and industrial lubricants, UPC offers its exclusive Distributor Alliance the most aggressive, innovative and growth-oriented marketing program in the industry.  To learn more, please contact us 877-700-2521 or via email info@united-lube.com.   

 

 


 

 

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