Crude Oil at Historic Lows and 5W30 is High Priced

[HTSS_TR]

Look at the chart, crude oil jumped more than 1000% from 1998 to 2008, did we see gas or engine oil jump 1000% in the same period ?

As soon as crude oil drops you guys demand gas and engine oil drops the same percentage.

Many industries upcharged when crude oil price was more than $80-100 a barrel the last few years, most of those industries didn't adjust the surcharge when crude oil went down. Why don't you blame those industries such as airline, freighter ... ?

Which one is a better buy for your money, a gallon of gas at less than $2 (national average) or a gallon of milk for more than $3 ? or 500 ml bottle water for $1 at convenience store ?

Also, engine oil is pretty cheap in US compares with almost all other countries, especially most European countries are paying double or more what we do.

 

[Joe90_guy]

Originally Posted By: lubricatosaurus
Wow, according to Joe90_guy's lube report above, GroupIII base oil is 90 cents/quart. Treat rates with non-base-oil is what, like 20%. So 72 cents/quart for motor oil in just the base oil.

I have no idea what a 20% treat would cost per quart. Guessing those special chemicals (VM, esters, PPD, AW, FM, etc.) would add $1 per quart, then thats $1.72 per quart wholesale price for a GroupIII full synthetic motor oil, fully formulated.

Packaging would be say 20 cents/quart in volume. Rounds to $2. Shipping and profit per quart puts it at around $3.50/quart to Walmart's door. Add retail profit of $1/quart, and Walmart should be selling full synthetic at $4.50/quart (SuperTech).

I'm not far off, as Walmart.com actually sells 1-quart bottles at $4.97 instead of my $4.50 guess, all-groupIII synth SuperTech oil from Warren.



If you want to do a back of an envelope cost calculation, use about 90% base oil,1% VII solid polymer and 9% DI/PPD/other junk.

I've been away a long time now but I see that according to Platts, the price of both ethylene and propylene tanked in December dropping well below $US 1000/MT. They are probably even lower today.

http://www.platts.com/news-feature/2014/petrochemicals/pgpi/ethylene

http://www.platts.com/news-feature/2014/petrochemicals/pgpi/propylene

OCP VII is basically a 55:45 mix of the two. Even if you double up, you're probably talking about a solid VII price of about $US 2000/MT.

DI is a far more variable commodity. Last time I looked a couple of years ago, $US 2500/MT was a reasonable ball park figure for DI. It's probably dropped since then. Maybe $US 2000/MT?

Redo the numbers and it probably says there's a lot of scope for the price of oil to drop further.

Can I also say that prices for engine oil in the US have always been pretty good. If you lived in the UK, your sense of getting stiffed every time you by a can of GTX would be far more acute!

 

[HTSS_TR]

Originally Posted By: Joe90_guy
Back in December I (controversially) floated the idea that basic engine oils should cost about a quarter of what they did back in 2008. I now think this was incorrect. Looking at current base oil prices, I think the more accurate figure is that they should be A FIFTH of what they were!

Here are the numbers from Lubes&Greases...

http://www.lubesngreases.com/lubereport/16_5/base-oil-report/-9945-1.html

Since December, many Group II base oils have dropped below $US 600/MT. I haven't seen prices this low in donkey's years!

PS - do be wary of some of the 'semi-expert' views that have been expounded on BITOG. Some are clearly coming from people that work in the industry and who will say just about anything, however crass and misleading, to maintain the (favourable to them) status quo.

I am not working for any company that has anything to do with oil industry.

You pick the highest crude oil price in 2008 and demand any product derived from crude oil to drop in price accordingly.

Now, if you look 10 years before the highest crude oil price of 2008, that year was 1998 and crude oil was around $10-12 a barrel.

Did you see the price of anything jumped 10 times from 1998 to 2008 ? Did gas jumped 10 times ? Did engine oil jumped 10 times ?

 

[xfactor9]

The cost of motor oil has never moved in lockstep with the price of crude. Otherwise a 5-quart jug of Mobil 1 should have cost $70 in summer 2008 when crude hit $140/bbl, from $45/bbl in 2005.

The price of crude oil is fairly volatile but motor oil prices are very stable. In both directions

 

[BISCUT]

Paralleled with ammunition prices and we see there is a lot of gov't induced price fixing allowed to occur. Yet Govt, I hear, is to protect the consumer....Just not of certain products.

Lobbyist.

 

[Joe90_guy]

This reminds me of that 'is the dress white and gold or blue and black?' debate from last year.
The dress was of course blue and black. Which is what I saw. Maybe it's because it was a British dress. Interesting...

 

[grampi]

Originally Posted By: Branson304
Maybe Walmart dropped Supertech prices, but the price of every other oil sure as h*ll hasn't gone down. Mobil 1 actually went up in price not that long ago.


That's what I've been seeing too. The price of Supertech has dropped a bit, but oil prices at the automotive parts stores are still at $4.99 or higher...they never seem to come down...

 

[grampi]

This oil price thing is probably a lot like businesses that outsource. When a company outsources it's production to another country to save on labor costs, does that company then pass those savings along to the consumer in the form of lower prices? Of course not, they pocket the extra money. They're probably doing the same with motor oil...

 

[gman2304]

I bought a stash of NAPA 5w30 last summer on sale for $1.99 per qt. I bought a 5qt jug of Valvoline 5w30 synthetic for $24.00 last week at Walmart. Buy when it's on sale.

 

[Al]

Originally Posted By: grampi
This oil price thing is probably a lot like businesses that outsource. When a company outsources it's production to another country to save on labor costs, does that company then pass those savings along to the consumer in the form of lower prices? Of course not, they pocket the extra money. They're probably doing the same with motor oil...

People seem happy to buy motor oil at $3.99, a box of Coco-puffs for $3.85, Candy bats at $.65, Baseball hats for $14, eggs fir $1.89. bananas for $.65, Birthday cards for $2.99+ I cold go on and on. You want price control or what? What's your point?

 

[lubricatosaurus]

Originally Posted By: Joe90_guy
If you want to do a back of an envelope cost calculation, use about 90% base oil,1% VII solid polymer and 9% DI/PPD/other junk..
Redo the numbers and it probably says there's a lot of scope for the price of oil to drop further.


90% might be right for my Walmart (Warren) SuperTech groupIII full-syn here in the U.S., which is an SN GF-5 dexos1 oil. The 80% base oil estimate I used was from LL-01/229.5 oils on your continent or island across the pond:

Joe90, are you saying an SN GF-5 dexos1 full-syn here would have only half the non-base-oil amount as LL-01 oils? Could be right, and is interesting, given the spec differences.



Originally Posted By: xfactor9
The cost of motor oil has never moved in lockstep with the price of crude. Otherwise a 5-quart jug of Mobil 1 should have cost $70 in summer 2008 when crude hit $140/bbl, from $45/bbl in 2005. The price of crude oil is fairly volatile but motor oil prices are very stable. In both directions


Nobody said lock step. Material wholesale costs are just one component. If you read my rough estimate above, around ~$1.72 worth of wholesale mass cost is inside a low-tier full-synthetic GroupIII oil quart, so that's around 1/3 the retail price on the shelf is due to material oil alone.

 

[Joe90_guy]

Lubricatosaurus,

You've shown the Petronas Group III version of the Infineum P6660 system (note the sign of The Beast!!).
All of the VIIs here are liquids. It's not exact but to reduce these to solid VI, multiply the numbers by 0.1. eg the first 5W40 contains 9% Shellvis 261 liquid but only 0.9% Shellvis 260 solid (in Infineum speak '1' denotes a liquid and '0' the solid). What's not solid is base oil so add this to the total.
You can also apply the same rough 0.1 factor to the PPD.
Finally these DIs will be based on salicylate detergents for low SAP. As well as being rubbish detergents (just my personal opinion) they only come in low TBN variants so you need more of them in the pack relative to a 'proper' detergent (eg 400 TBN Mg Sulphonate). This partly accounts for the higher DI treat.

 

[javacontour]

This goes along with the paying for talent thread.

There are some out there that only see the materials costs. The costs of the capital, expertise and getting the product to your shelf don't count in their calculus.

 

[Joe90_guy]

Originally Posted By: javacontour
This goes along with the paying for talent thread.

There are some out there that only see the materials costs. The costs of the capital, expertise and getting the product to your shelf don't count in their calculus.


So let me get right. When the price of gasoline halves in the US, you purposely drive around to find gas at the old, high price because you worry about all that money the Saudis invested in oil wells???
Or are you just like rest of us that just buy whatever's cheapest?

 

[javacontour]

Not sure how you got that from what I said?

Of course I look for the best value for my consumer dollar.

I try to find the best price, but I'm also not going to put $1 a quart no-name oil that may not pass the PQIA tests for quality and consistency.

All I'm saying is that there are some who think it's a 1:1 ratio here. If crude is 1/2 price, they expect motor oil to be half price. If it's not, they complain. But they are not building refineries or bottling operations. They are not hiring chemists or tribologists to produce the motor oil that will both meet current standards and follow crude prices 1:1.

That's what I'm saying.

There are those that expect everything but the raw materials to be free.

I'm not part of that crowd.

Doesn't mean I don't appreciate a good bargain. But I also appreciate what goes into getting a quart or gallon of quality motor oil on the shelf at my local retailer.

Originally Posted By: Joe90_guy
Originally Posted By: javacontour
This goes along with the paying for talent thread.

There are some out there that only see the materials costs. The costs of the capital, expertise and getting the product to your shelf don't count in their calculus.


So let me get right. When the price of gasoline halves in the US, you purposely drive around to find gas at the old, high price because you worry about all that money the Saudis invested in oil wells???
Or are you just like rest of us that just buy whatever's cheapest?

 

[Al]

Originally Posted By: javacontour
Not sure how you got that from what I said?

lol...yea quite leap there...

 

[grampi]

Originally Posted By: Al
Originally Posted By: grampi
This oil price thing is probably a lot like businesses that outsource. When a company outsources it's production to another country to save on labor costs, does that company then pass those savings along to the consumer in the form of lower prices? Of course not, they pocket the extra money. They're probably doing the same with motor oil...

People seem happy to buy motor oil at $3.99, a box of Coco-puffs for $3.85, Candy bats at $.65, Baseball hats for $14, eggs fir $1.89. bananas for $.65, Birthday cards for $2.99+ I cold go on and on. You want price control or what? What's your point?


Why do you always over-exaggerate everything? How did you get that from my post, which was pretty self explanatory, and it had nothing to do with price controls...

 

[Joe90_guy]

As it happens, I was in Tesco's today (it's our smaller version of Walmart). I see you can get a 4 litre can of Tescos own-brand 15W40 (SL/A3/B3) for £16 ($US 23.2) or about $US 5.8/litre.
Right now the European price of Group I 150SN (according to Petroleum Argus) is around $US 534/MT. I'll guess that this oil contains around 8% DI and 0.8% solid OCP giving a rough finished raw material cost of $US 665/MT or $US 0.75/litre.
So of the $US 5.8/litre Tesco retail price, $US 5.05/litre goes to overheads and margin. Still think we're not being shafted when it comes to buying the slippery stuff??

 

[HTSS_TR]

Originally Posted By: Joe90_guy
As it happens, I was in Tesco's today (it's our smaller version of Walmart). I see you can get a 4 litre can of Tescos own-brand 15W40 (SL/A3/B3) for £16 ($US 23.2) or about $US 5.8/litre.
Right now the European price of Group I 150SN (according to Petroleum Argus) is around $US 534/MT. I'll guess that this oil contains around 8% DI and 0.8% solid OCP giving a rough finished raw material cost of $US 665/MT or $US 0.75/litre.
So of the $US 5.8/litre Tesco retail price, $US 5.05/litre goes to overheads and margin. Still think we're not being shafted when it comes to buying the slippery stuff??

You need at your country tax on oil, gasoline ...

As far as I know Mobil 1 in Walmart is about $5.25/quart but it's much higher in England, mainly because of higher tax.

Mobil 1 was about $3.50-4.0/qt back in late 80's early 90's, the inflation was about double in 25 years but M1 only went up around 50%. If you take into account the quality of current oil compares with 25 years ago, the current price should be 50% higher.

Also, gasoline in US is much cheaper than most countries in Europe because we have lower tax.

 

[Joe90_guy]

HTSS_TR,

Yes we have tax on both gasoline and engine oil but at very different rates.

95 RON unleaded here is currently about £1.00/litre (about $US 5.49 per US gallon). I'm guessing that that's very high compared to what you pay in the US because of the high level of tax it attracts (about 75%).

Engine oil however, like most other commodities here, simply carries standard rate Value Added Tax (VAT) at 20%. This is still probably high versus the US but when you add together your state and federal taxes, it's probably in the same ball park.

The bottom line is I don't think you can blame the high price of engine oil in Europe on tax. I think it has far more to do with a lack of competition in the market place and an industry that has evolved to serve its own needs rather than those of the end customer.

PS - speaking personally, I rather like the fact that we tax gasoline the way we do in the UK. Over the last couple of decades it's encouraged smaller, more fuel efficient cars and helped keep pollution in check (important on this small, overpopulated island). It also helps pay for our rather wonderful National Health Service.