September 19, 2018
Volume 3 Issue 8
Speaker Forecasts Shift to Group II+, Group III
DES MOINES, Iowa – Efforts to improve fuel economy and reduce emissions will continue pushing United States engine oils towards lower viscosities while gradually stimulating demand for API Group III base oil, an industry insider said at a conference held here late last month.
The U.S. base oil market has changed dramatically since 2009, Erica Snedegar, manager of base oils and intermediate products for Vertex Energy, said Aug. 22 at ACI’s U.S. Base Oils and Lubricants Summit. This is in part due to North American and U.S. engine oil markets evolving to require higher quality base oils.
She predicted that base oils used for engine lubricants in the United States will shift to Group II+ and some Group III. In 2017, Groups I and II accounted for 87 percent of such demand, with Group III accounted for the remaining 13 percent. By 2027, the combined share for Group I and II will decline to 65 percent, while Group III’s share will increase to 35 percent, she said.
Meanwhile, new plants and expansions in foreign countries should increase competition among Group III sellers, she added. “More competition means longer markets, longer markets mean cheaper prices, and cheaper prices mean more people buying Group III,” she said. “A lot of it’s going to be supply and demand, but how fast will we get there? Time will tell.”
Changes in distances driven and recommended oil drain intervals are helping reduce engine oil demand. “The North American engine oil market is flat to declining,” she said. “We all see it. Passenger car motor oil volumes are most impacted by miles driven and oil drain intervals extending. We see that a lot in the used oil business. Being a collector, we’re seeing less and less used oil, because there’s less and less being generated. That’s because people are taking longer between oil changes.”
Multi-grade 5W-30 oils still dominate the passenger car motor oil market with about 45 percent of U.S. demand. 0W-XX engine oils only account for about 10 percent of the market today, she said, but that share will rise to 33 percent by 2027, when 5W-30 decreases to 25 percent. That means the U.S. is going to need higher volumes of Group III, she added. “You’re seeing more and more of an advancement from Group IIs into Group IIIs,” she said. “Lower-viscosity lubricants yield better fuel economy and lower emissions.”
A similar shift is expected for heavy-duty engine oils. “We are moving on the heavy-duty side into Group IIIs, although much slower,” Snedegar said. “A lot of people still live and die by certain brands of heavy-duty motor oils in the 15W-40s, but we are seeing an increase” in use of lower-viscosity heavy-duty engine oil.
The majority of on-highway fleets are expected to use 10W-30 oil by 2022, she said, while owner operators and light-duty diesel pickups will also trend to lower viscosity offerings, at a slower pace.
She noted that the automotive lubricants share of global lubricant demand is similar to North America’s, and the same trends in engine oils can be expected, including the transition to lower viscosity grades. “This means increased demand for Group III at the expense of Group I and Group II,” she said.