The global base oil industry has a wide-open horizon of opportunities. It reached an evaluation of US$ 33.2 billion in 2017. It is expected to register a steady CAGR of 1.7% during 2017-2026.
As a whole, the base oil industry is both growing and improving. While the demand for Group I base oils low, Group II and Group III demand grew at a high rate over the last ten years.
The majority believe that the base oil industry has grown in the past ten years, and most believe the industry will continue to grow in the next ten years.
A global survey has concluded that Group II and Group III usage will rise by 41% and 38% while Group I usage is expected to fall by 28% by 2030.
The ExxonMobil Basestocks 2018 Industry Pulse Report has surveyed 306 base oil decision makers from the industries: Additive manufacturers, lubricants manufacturers, industry association, and the equipment manufacturers.
The survey by ExxonMobil found that 65% of companies are already using Group I base stocks at lower levels than previous years.
The survey observed that why the global industries sector is clearly anticipating a decline in demand for Group I.
It also recognized that Group I base stocks will continue to be relevant and favoured for specific formulations well into 2030.
Why the market is witnessing a shift in demand from the group I base oils to group II & III?
The unstable supply of crude oil and the growing demands of the automotive industry are the key factors.
The unstable supply of crude oil to hamper the growth of the base oil market
There are various geopolitical challenges surrounding the supply of crude oil. These challenges affect the base oil significantly, as base oil is refined derivatives of crude oil.
Additionally, as the base oil is essential for manufacturing various products in major industries such as automotive, their supply is often controlled with long term contracts.
The unstable supply and fixed nature of the supply of base oil are expected to put extreme pressure on pricing and profits in the base oil market.
Growing demand in the automotive industry to propel growth
The growing demand in the automotive industry due to stringent environmental regulations related to performance improvements are expected to drive growth for the base oil market.
The automotive industry requires various lubricants from the base oil market. Their qualities including oxidation, viscosity, seal compatibility, pour point, thermal stability, and additive solubility are essential for end-use in automotive as well as in many industrial applications.
Furthermore, the increasing regulations are phasing out demand for Group I base oils. These regulations are expected to shift demand progressively towards group II and III.
These groups of oils in the base oil market undergo a more rigorous hydrocracking process. These are also priced similar to oils in group I. Hence, they make for ideal replacements in the base oil market.