Since the start of the COVID-19 pandemic, the state of the US lubricant market has shifted. The initial shutdowns led to significant production delays that reverberated throughout the market for the next two years of the pandemic. Lubricant developers struggled to produce shipments, suppliers were left scrambling to fill orders or waiting months for deliveries, and prices rose. Initially, there was hope that the supply chain and production issues would resolve as the economy improved and the pandemic wound down. But now, four years later, many of these issues persist, and demand has dropped overall, which many lubricant marketers fear may be the ‘new normal’ in the United States.

There are many reasons for the waning demand for lubricant, especially in the United States. In this blog, we will outline the unique challenges facing the US market, such as the adoption of electric vehicles (EVs), environmental regulations, and overall declining consumer demand. This trend directly contradicts the global lubricant market outlook, which is growing rapidly. We’ll explore why the two markets behave so differently and how they may impact your lubricant needs as a small business owner.

What drives lubricant demand?
Lubricants play an essential role in machinery efficiency. Industrial lubricants such as hydraulic fluids, gear oils and metalworking fluids are vital for keeping manufacturing engines and systems in good working condition by reducing friction, cleaning the engine during production and managing heat transfer. Similarly, automotive lubricants, such as engine oils, transmission fluids and more, perform the same function in gasoline and diesel engines. This demand fuels the growth of lubricant processing and supply.

Globally, the lubricant market is in a good position. According to Future Market Insights (FMI), steady growth is projected over the next decade. The global lubricant market is currently estimated at UDS 174.94 billion, and analysts predict it reach a value of $271.68 billion by 2034. Most of the worldwide growth is due to increased industrialization in developing regions, notably China and India, for industrial and commercial lubricant products. Similarly, increasing vehicle production in the Asia-Pacific and Latin America markets fuels demand for engine oils, transmission fluids, and other automotive lubricants.

Why is lubricant demand declining in the US?
Despite the projected growth that the global lubricant market is experiencing, things aren’t so rosy here in the US. Petroleum Trends International data shows lubricant demand decreased by 200 million gallons from 2019-2023. This drop mirrors a similar trend during the ‘Great Recession’ from 2007-2009. At that time, demand, measured at 2.56 billion gallons in 2006, dropped to 2.20 billion gallons just three years later in 2009. Overall, that shortfall measured 360 million gallons, a 14% loss compared to pre-recession records. When the economy began to recover, lubricant demand bounced back in 2010, but at a lower rate than before the Great Recession. This trend continued up to the start of the COVID-19 pandemic in 2020.

As we all know, when the pandemic began, production fell sharply, and the industry was still struggling to recover. But when we look at what happened during the Great Recession, we can see that before the shutdowns in 2020, lubricant demand was already in decline here in the United States. Further global events like high inflation and geopolitical instability caused by the conflict in Ukraine and the Middle East continue to influence the international oil market and, subsequently, the US lubricant market as base oil prices and supply fluctuate. Can the US industry truly recover, or is the decline we’re experiencing the ‘new normal’?

What is driving the decline in lubricant demand?
Several factors influence the drop in lubricant demand, most notably in the commercial automotive and passenger vehicle sectors. Here are some of the most prominent.

  • Stricter environmental regulations: Lubricant manufacturers in the US, especially California, face some of the strictest environmental regulations. For example, in our home state of California, our government has passed strict emission standards for passenger and commercial vehicles. Lubricant manufacturers have had to adapt their formulas for higher fuel efficiency and reduced carbon emissions.
  • Growing EV adoption: Consumers are turning to EVs, especially here in California, where we rank number one in registered electric vehicles and public energy charging ports, according to Environment California. EVs require specialized lubricants in far less demand than gasoline or diesel vehicles.
  • Crude oil price volatility: The price of crude oil has been on a rollercoaster for the last few years, and it looks like it’s not stopping anytime soon. In the US, crude oil prices have fluctuated from a low of $27 a barrel in 2016 to a high of $110 a barrel in 2022, according to the EIA. As these prices fluctuate so widely, it’s difficult for lubricant manufacturers to produce their products and absorb the price increases and supply chain issues.

How can the US lubricant industry adapt to meet global growth?
The challenges facing the US lubricant industry are not going anywhere. So how can manufacturers compete, especially against the growing global market? Here are a few strategies that may help:

  • Expanding into new regions: The global lubricant market is growing rapidly because of the increased industrialization in Asia, India, and Latin America. These countries are growing manufacturing, and automobile usage is becoming more prevalent, which is ideal for lubricant manufacturers. If US manufacturers target these regions, there is a potential for further growth.
  • Product diversification: As EV usage grows and environmental regulations become tighter, lubricant manufacturers must diversify their product lineup to meet this demand. Manufacturers may need to increase the production of synthetic, low-ash lubricants, bio-fuel compatible lubricants, and other lubricants that meet specialized needs like high temperature, altitude or extreme weather. This diversification will also help manufacturers reduce production costs from crude oil price fluctuations. More specialized lubricant products will also help existing US markets by offering consumers more range for their specific vehicle’s needs.

We’re here to help, no matter what the market does
The US lubricant market has undergone a significant shift, and production issues are still an ongoing problem. As a California-based lubricant supplier, we’re constantly evaluating the market and looking for innovative ways to get our customers the products they need or alternatives that will meet their needs. In addition to lubricants, we also offer Chevron branded fuels. If you’re concerned about your lubricant needs or need fuel, we’re here to help!