Global events continue to shape energy and commodity markets, and the lubricants industry is no exception. Recent developments in the Middle East have created new challenges across global supply chains, impacting everything from crude oil and transportation costs to the raw materials used in lubricant production. While headlines often focus on crude oil prices, the relationship between crude and finished lubricants is more complex. Understanding what’s happening behind the scenes can help you have more informed conversations with your customers about why lubricant markets may behave differently than fuel markets in the months ahead. This overview provides context you can use to answer common questions and reinforce confidence in your supply.
What’s Happening?
Ongoing geopolitical tensions in the Middle East have disrupted portions of the global energy supply chain, particularly in and around the Persian Gulf region. This area plays a significant role in the production and transportation of crude oil, base oils, and other key feedstocks used throughout the lubricants industry.
In addition to broader energy market uncertainty, several major global base oil production facilities have experienced outages or disruptions. Group III base oils—which are commonly used in premium synthetic lubricants—have been particularly affected, creating tighter supply conditions worldwide. Industry estimates indicate that a significant portion of global Group III production capacity has been impacted in recent months.
As a result, manufacturers across the industry are facing increased costs and heightened competition for critical raw materials.
How Does This Affect Lubricant Customers?
Unlike gasoline or diesel, finished lubricants are produced through a complex supply chain involving multiple raw materials, including:
- Base oils
- Performance additives
- Packaging materials
- Transportation and logistics services
When disruptions occur, costs can increase across several of these components simultaneously.
Even if crude oil prices stabilize or decline, lubricant prices do not always move at the same pace. That’s because lubricant manufacturers must manage the cost and availability of materials that often remain constrained long after crude markets begin to recover.
For example, global shortages of Group III base oils and certain additives can continue to impact production costs even when fuel prices appear to be easing. Additionally, supply chains require time to rebalance after disruptions, especially when production facilities need months—or longer—to return to normal operations.
Simply put, lubricant pricing reflects the broader supply chain, not just the price of crude oil.
What We’re Seeing Across the Industry
The current environment has created challenges for lubricant suppliers around the world:
- Higher raw material costs
- Increased transportation and logistics expenses
- Tighter availability of certain base oils, particularly Group III products
- Greater pressure on independent blenders and suppliers that rely heavily on third-party sourcing
Many suppliers are working through constrained inventories while competing for limited global supply. Sharing this broader market context can help customers understand that current market conditions are affecting the industry as a whole—not just individual lubricant suppliers.
How Phillips 66 Is Positioned to Support Customers
While market conditions remain dynamic, Phillips 66 is well positioned to maintain reliable supply.
A key advantage is our integrated lubricants value chain. Our base oil production is supported by domestic refining and manufacturing assets, allowing us to maintain greater visibility and control across the supply chain. We also continue to invest in business continuity measures, including additional storage capacity, supply diversification, and operational flexibility.
Recent actions include:
- Increasing Group III production capabilities
- Expanding storage and inventory flexibility
- Securing additional supply options where appropriate
- Creating formulation optionality for adaptability
These efforts are designed to help us navigate market disruptions while continuing to provide dependable service to our customers.
While global market disruptions continue to create pressure across the lubricants industry, Phillips 66 is positioned to provide stability through a strong, integrated supply network and a long-term commitment to supply reliability.
We’re actively monitoring market conditions, planning for multiple scenarios, and taking proactive steps to help ensure customers have the products they need—today and into the future.
