RelaDyne, one of the nation's leading providers of lubricants, fuel, diesel exhaust fluid (DEF), and industrial reliability services announced today that it has acquired Sunwell Corporation dba RediFuel. RediFuel, founded in 1991, is a San Antonio-based fueling services company providing fuel products and services to reliability-centric customers.

RediFuel is a natural addition to RelaDyne's reliability focused business model.  RediFuel supplies the fuel to most of the data centers, hospitals, medical facilities, office buildings, and telecommunications infrastructure in San Antonio and Austin, Texas.  RediFuel has built their business on strong customer relationships tied to excellent and reliable service. 

John Sheesley and the entire sales and operations team of RediFuel will be staying with the company to ensure continuity for customers and employees. RediFuel will operate as a new location in RelaDyne's gulf coast region. According to John, "RelaDyne is a great partner for the RediFuel business, as it gives our employees more opportunity to grow professionally and our customers a more robust offering while ensuring there is the consistent level of service they have come to expect from us.  We are truly excited to be a part of the RelaDyne family and look forward to scaling the business in San Antonio, Austin and throughout the RelaDyne footprint."

"RediFuel customers and associates are a great fit for RelaDyne. We look forward to growing together from the many opportunities this acquisition provides," says Larry Stoddard, Chief Executive Officer for RelaDyne.

Jeff Hart, Executive Vice President of Business Development for RelaDyne, commented on the acquisition, "The acquisition of RediFuel is yet another example of how the RelaDyne platform can provide owners, employees and customers with more opportunity.  RelaDyne continues to be the acquirer of choice for many companies in the fuel, lubricant and services business.  RelaDyne brings capital, technology, resources, scale, and enhanced customer offerings that promote growth in the companies we acquire. This deal represents our third acquisition in 2015, and we anticipate closing significantly more acquisitions this year as we create a national platform in the industry."

About RelaDyne     

RelaDyne, headquartered in Cincinnati, Ohio, is an industry leading lubricant, fuel, and DEF distributor providing customers with integrated reliability management services for industrial and commercial businesses in the United States. RelaDyne was formed in 2010 by the combination of four industry leaders - Mid-Town Petroleum, Inc. (Bridgeview, IL), Oil Distributing Company (Cincinnati, OH), The Hurt Company, Inc. (Houston, TX) and Pumpelly Oil Company (Sulphur, LA). RelaDyne's distribution platform spans 26 locations serving states in the Central US. In May 2014, RelaDyne's industrial services business expanded with the acquisition of Turbo Filtration Corporation (TFC), enhancing their offering to key industrial customers throughout the US. The company also benefits from the support of its business-building financial partner, AEA Investors LP, which manages funds worth approximately $6 billion of invested and committed capital. For more information, visit www.RelaDyne.com.

While price decreases were big news in the lubricants business in January 2015, there is an important back story about the higher cost and prices of some synthetics that needs to be told.

Price decreases started in 2015 when Chevron was the first to announce a general decrease in lubricant prices. Shell, ExxonMobil, Phillips 66, Valvoline, Castrol, Petro-Canada and others soon followed. The decreases were not a surprise to most lubricant marketers. In fact, many in the business anticipated decrease announcements in December 2014. This is because the price of crude was plummeting in the 4^th quarter, base oil prices were dropping in response, and the highly visible price of gasoline was reaching levels not seen in years. With that, in the views of many lubricant marketers and end users, the pressure was on for majors and independents to respond accordingly by decreasing lubricant prices. And although it took a month longer than some expected, lubricant manufacturers did respond by announcing price decreases in January 2015. Most of these decreases, with effective dates in January and February, were in the area of 3 to 4%, which translates to roughly $0.35 to $0.45 a gallon.  

But... an important point that may have been lost in the frenzy of the price decrease announcements is that not all lubricants are made from the same types of base oils. Because of this, while the industry was announcing decreases and price easing in white oils, API Group I, II and III, little notice was being made of continuing increases in Group IV (PAO) and Group V base fluids. As a result, while the prices of many lubricants were decreasing, the cost of lubricants made from Group IV (PAO) and Group V base fluids was on the rise.

One example is seen in the price of PAO which recently increased by close to 4%. Another is seen in the price of PAGs which marched up nearly every quarter in 2014. Adding to this are the ongoing increases in the price of nearly all types of esters.

So how is it that when the price of API Group I, II and III base stocks are decreasing and driving the price of many lubricants down that the cost of PAO and esters are increasing which in turn is driving the price of some synthetics lubricants up?

Part of the answer starts with an understanding that demand for PAO is increasing and supply is comparatively tight. Where many counted PAO out over a decade ago when Group III made its debut as a "synthetic," demand for PAO for use in motor oils has increased to meet emission and fuel standards and regulations driving the movement towards higher performance lubricants with lower viscosities. This has resulted in increased demand for low viscosity PAOs.

While demand has increased, planned Normal Alpha Olefins (NAO) outages have had a negative impact on short-term supply of NAO feedstocks. As a result, PAOs have been on allocation worldwide for the better part of the past three years. Although plant de-bottlenecking has helped to elevate some of the shortfall in supply, supply continues to come up short of the growing demand for PAO.

And then there are the esters.

In general petroleum-derived products tend to follow crude prices, but for synthetic esters a different set of criteria govern the movement of the raw materials. 

In addition to upward price pressure from the higher cost of the raw materials, increased demand for esters is also putting pressure on prices. Increasing use of esters in Food Grade applications and the need to use these stocks in applications requiring ever increasing higher temperature performance further enhances their value where there are fewer alternatives and once again demand may exceed supply leading to higher pricing. The so called "True" synthetic lubricants utilizing Group IV and higher quality base fluids may not require as many additives as petroleum counterparts, but many of these additives are increasing in costs and not decreasing as crude prices are doing.

So at the end of the day, whereas some might conclude that the price of all lubricants should decrease when the price of crude drops like a rock, there is more to the story when speaking about the cost and price of some synthetic lubricants. This is because the raw materials required to make some synthetics are distantly or not at all connected to the price of crude. 

The end result is that when a buyer is expecting lower lubricant prices due to significant drops in the price of crude, it's important to understand that not all lubricants are made from the same raw materials. Now, more than ever, price increases need to be justified and customers are expecting full documentation on the driving factors behind those increases. At the same time margins will suffer for those blenders that have customers that will simply not accept increases.

Never before have blenders of high-performance synthetic industrial lubricants had to look so carefully at their formulations to see where they might be able to find some savings to preserve those margins and not have a negative effect on lubricant performance.