The past year was pretty wild in the fuel and lubricant industry. So much has happened that we thought it would be a good idea to refresh your memory before we get too far into 2023.
The rollercoaster of gas prices climbed higher than ever in 2022
This year was the worst in a long time for consumer gas prices. Prices reached highs that many didn’t think would ever happen. After some lows during the COVID-19 pandemic, the price hike was a relief for oil companies but a huge problem for consumers. Let’s recap how the prices fluctuated this year from the 2022 Gasbuddy Gasoline Price Recap.
The forecast for fuel prices was essentially thrown out the window in February 2022 when Russia invaded Ukraine on February 24. The ensuing conflict started a step increase, and by March 5, the national gasoline average hit $4/gal in a record single-day spike. Diesel prices also a record high at $5.16/gal on April 29. These price gains were attributed to faster-than-anticipated consumer demand after the early days of COVID-19 and increased fuel exports to Europe due to the Russian/Ukraine conflict. As a result, exports of U.S. LNG to Europe increased by 18% compared to 2021. By the end of 2022, the total of U.S. LNG exports to Europe was estimated as 74% of all U.S. LNG exports.
But the early price increase in the year’s first quarter was only the start of the gasoline price rise. By March 22, Los Angeles was the first city in the U.S. to hit an average of $6/gal. By June, the national average had surpassed $5/gal, and by July 4, the highest-ever Independence Day gas prices were recorded.
As the summer wound down, prices began to drop in some areas of the country. For the first time since March, the national average dipped below $4/gal. But it still wasn’t enough. Thanksgiving gas prices were still the highest ever recorded. Here in California, prices remained the highest in the country. Luckily by Christmas, the national gasoline average price dipped below $3/gal.
California had the highest gasoline prices
Here in our home state, fuel prices rose to record-high levels and stayed there for far longer than they did across the nation. Even in September, when gasoline prices began dipping back down, the average price of gasoline in California was $6.29/gal compared to the national average of $3.79. Why did prices remain so high in the sunshine state? Experts point to two main issues, limited supply, and offline refineries. In the fall, four major California refineries were offline for maintenance issues, seriously hurting gasoline production in the state. California produces roughly 1 million barrels daily, which is not enough to meet the demands of the population, so the state relies on imports from across the country. With four refineries out of commission, the state needed to import more gasoline than before. Additionally, California has the highest gasoline tax in the country at 68.15 cents/gal.
California enacted a ban on the sale of gasoline-powered vehicles
High gas prices in our home state weren’t the only way California impacted the fuel and lubricant industry this year. In August, the California Air Resources Board announced a ban on the sale of new gasoline-powered vehicles starting in 2035. The ban is the most significant in the country so far, and it is a significant part of Gov. Gavin Newsom’s 2020 target to shift the state away from internal combustion engines. The ban is expected to lead to increased production of cleaner vehicles, including zero-emission cars, trucks, and heavy-duty vehicles. The goal is to aid in the California Air Resources Board’s goal for a 50% reduction in air pollution from cars and trucks by 2040.
The lubricant industry was plagued by shortages and price increases
2022 was not an easy year in the lubricant industry either. After a rough 2020 caused by the challenges of COVID-19 shutdowns, 2022 started on a very bad foot. The ice storm that hit the gulf of Texas in 2021 shut down Lubrizol’s Deer Park Plant, the most prominent additive producer in the world. Another devastating fire at Lubrizol’s Chemtool grease plant in June 2021 further complicated things for the industry.
So by the start of 2022, additive production plants and blenders were already having a challenging time meeting demand this year, as base oil supply remained tight and supply chain issues began to plague the industry. As the Russian/Ukraine conflict started, base oil prices began to rise, just as gasoline did, and by March, many lubricant manufacturers announced a 15% price increase. Another price increase of 15% from lubricant manufacturers was pushed through in April. However, for consumers, the year of price increases didn’t seem to end. By June, a fourth finished lubricant price increase of another 12-15% went through and was effective by July.
Just as gasoline prices rose rapidly this year because of base oil increases, lubricant prices also rose sharply. By September, base oil prices finally started to cool, and prices stabilized. But by then, a record number of five price increases in one year for finished lubricants had taken place, and at a time when the annual inflation rate rose 7.1%. For many of our customers, the increased costs of nearly everything were challenging to swallow.
But price increases weren’t the only issue that affected the lubricant market. Additive shortages and blending problems are still significant issues. Severe supply issues remain, and some manufacturers have had to remove lubricant products from their lineups or offer alternatives to customers. Due to supply issues, many customers had to switch to alternative lubricant products to fill the gaps in their lubrication program. Our team here at Greg’s Petroleum Supply did our best to help our customers find the right lubricant tools for their equipment and to help keep our customer’s vehicles and machinery on the road.
We’re here for you, no matter what 2023 brings
The past year was unlike any other in the fuel and lubricant industry. As a Chevron lubricants supplier and a Valvoline lubricants supplier, we did our best to help our customers navigate the difficult periods and transitions that came with this year. We hope things will improve in 2023 and be a bit more stable, but our team is here to help no matter what happens. Call us if you have questions about your fuel or lubricant needs this year. We’re always here to help!