Oil prices have been on the rise for almost all of 2021. According to lubricant trade journal JobbersWorld, ExxonMobil, Shell, Chevron, and all other suppliers have announced finished lubricant price increases by as much as 20%, although the increases will vary by product. Many of the increases started going into effect on April 1, 2021 and have continued to rise.
Since there is a good chance you purchase engine oil when and where it’s cheapest, have you ever wondered why it’s more expensive right now then just a couple of years ago?
Production Slowed During the Pandemic
Due to the Pandemic that caused most people to park their cars for an extended period of time the oil companies slowed production to meet demand. Just to give you an idea, before the pandemic, there were 12.8 million barrels of oil produced every day. Experts are predicting less than 11 million barrels are being produced today.
Now that demand is back, it’s causing the price of oil to reflect usage. This has a trickle down effect to both motor oil as well as motor oil lubricant prices.
Reduced Additive Supply
Oil additives are chemical compounds that improve the lubricant performance of base oil. Since engine oils have the shortest shelf life due to this heavy additive load they should be used as quickly as possible to mitigate any problems associated with separation.
Unfortunately, Chemical-based precursors made from crude oil such as ethylene oxide and polyglycols are currently scarce. Lube blenders therefore reported a shortage on crude oil-based additives and plastic containers.
Tighter Transportation Market
In a global economy, transportation and shipping is essential to keep the world running. The major price increases in shipping fees, packaging, and labor shortages has caused oil producers to increase their prices to meet bottom line obligations to their shareholders.
It’s a classic “pass on the increases” situation that consumers end up bearing the brunt of. With no signs of the constraints on the transportation and labor markets easing up, economists aren’t predicting a change anytime soon.
Are Oil Prices Going Up or Down the Rest of 2021?
You can be fairly certain the price increases on all oil will continue to increase over the next few months. We have heard from numerous ATI members that they have already seen two and three price increases on engine oil from their distributor with more on the way.
Experts expect the market to calm down as we move into the fall and winter, but with the uncertainty of Covid-19 globally there is still a lot of uncertainty. Do your best to stay patient and take advantage of opportunities to get the highest quality oil at the best prices to run your shop.