US independent base oils decry price squeeze

10 June 2008 00:06  [Source: ICIS news]

HOUSTON (ICIS news)--A US lubricant association said on Monday it will complain to the Federal Trade Commission (FTC) that independent producers have been caught in an unfair price squeeze by major oil company suppliers.

The Independent Lubricant Manufacturers Association (ILMA) said its members have received numerous base oil price increases from suppliers that are effective immediately.

However, these same suppliers delay finished product price increases for 45 to 60 days, causing a price squeeze on independent lubricant manufacturers and placing them at a competitive disadvantage with the major oil companies.

Blenders have been increasingly worried over the relentless surge in base oils prices.

The association said it was asking members for anecdotal information regarding the pricing practices of major oil companies.

“ILMA continues to be concerned that its members are covering their suppliers' delays in finished lubricants price increases through the immediate base oil price hikes,” said ILMA General Counsel Jeff Leiter. “We want to convince the FTC that it is time for the agency to take a hard look at the level of competition in the lubricants industry, especially for base oils.”

The association wants the FTC to interpret and enforce the provisions of the Energy Independence and Security Act of 2007 (EISA) related to preventing market manipulation in the petroleum industry, an association spokesperson said.

ExxonMobil’s Gulf coast posting for solvent neutral 150 viscosity is $4.12/gal, according to global chemical market intelligence service ICIS pricing, up 41% from its price of $2.92/gal at this time last year.

The biggest challenge with the constant hikes is passing along the increases quickly enough, an independent blender said.

“Although the Citgo posted price for paraffinic base oils has risen almost ten times in 2008, finished lubricants prices have only increased a couple of times,” the blender said.

Finished lubricant producers have recently announced hikes in the region of 12-18%, but this is only their second or third time to increase prices this year, the blender added.

Citgo announced it would implement list and customer-specific price increases on all finished lubricants from 12-15%, effective with shipments occurring after 1 July. 

In the same period, Shell announced that effective on 5 August, it would implement a general price increase for all finished lubricants of 15%. ConocoPhillips announced a price increase for all finished lubricants by up to 18%, effective 1 July.

“These increases are not effective until late third quarter, but we have been absorbing base oils hikes almost weekly lately,” the blender said.

ILMA includes 292 members.

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By: Heather McGuire Doyle
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