Increasing lubricant demand as the world economy recovers from the shock of the COVID-19 pandemic and continued supply (and supply chain) challenges have pushed oil suppliers to steadily raise prices throughout 2021, including a new round of hikes this month.
This newest price increase on finished lubricants and other oil additives continues a trend that stretches back to the early months of 2021, but links directly to myriad challenges from the COVID-19 pandemic.
While prices are set to increase yet again this month, there is hope that demand and supply will find equilibrium early in Q1 2022.
December Sees More Lubricant Price Increases
Nearly a dozen top suppliers of crude and finished oil products announced price increases in December 2021. Tilley Distribution’s partners, including ExxonMobil, have confirmed price increases up to 15% starting December 9. Like all suppliers, ExxonMobil has tried to avoid increases to better support their customers, many of whom have experienced longer wait times and limited availability. Unfortunately, market forces have made it impossible to move forward without price adjustments.
Why Lubricant Supply Fails to Meet Demand
The industry continues to navigate the many hurdles caused by the COVID-19 pandemic. When demand for crude oil and finished oil products all but stopped in the spring of 2020, oil producers essentially shut off the spigot. As economies slowly recovered, many suppliers were slow to ramp up production.
As supply lagged, more problems emerged: COVID-19-related production stoppages, labor shortages, and damage to refineries in Texas and other parts of the world due to natural disasters caused further delays. For example, a shortage of qualified truck drivers has left some lubricants sitting at the manufacturing site rather than meeting transportation deadlines.
The impact on the lubricant industry was unprecedented. Suppliers were forced to raise prices six times by June 2021. Even with oil production increasing starting in July and August and the release of 50 million barrels from the US oil reserves in November, it may still be some time until finished petroleum products catch up with demand, lowering prices.
Navigating What’s Next with Tilley Distribution
To learn more about how our robust supply chain can play a role in keeping your business moving, contact a Tilley representative today.
