Lubricating Oils and Greases
SIC 2992
NAICS 324191
The world's lubricant industry refines, blends, and compounds oils and greases from purchased mineral, animal, and vegetable materials. See also Petroleum Refining.
Within the enormous worldwide oil industry, lubricants constitute a downstream specialty business that generates significant revenues and profits for producers. Most of the major oil companies are key players in the lubricants industry, but independent producers still hold a significant share of lubricant volume in many countries. The highest volume of lubricant consumers includes those in rubber manufacturing, transportation and equipment, passenger cars, chemical manufacturing, and railroads and aviation. Other industrial users of lubricants are those involved in primary metals such as aluminum, steel plants, and mining; the printing industry; fabricated metals; food processors; and pulp and paper manufacturing.
The vast majority of all lubricants are made from petroleum base stocks, but newer synthetic lubricants, which offer unusually long service life and enhance functionality, are becoming a larger presence on the global market. By the mid-2000s, specialty companies such as Pennzoil Quaker State and Burmah Castrol were no longer separate entities but had been acquired by so-called "Big Oil" companies.
Two of the associations serving the lubricants industry were the Independent Lubricant Manufacturers Association (ILMA) and the National Lubricating Grease Institute (NLGI). In 2004, there were 300 member companies of the ILMA, which together accounted for one-fourth of the worldwide lubricant production and the vast majority of specialty industrial lubricants. The organization was reviewing its strategic plan in 2004. The NLGI had member companies in 26 countries.
Lubricant manufacturers produce a wide variety of lubricant products, including consumer automotive products such as motor oil, brake fluid, and transmission oil. Other major product areas include commercial automotive, industrial metalworking fluids, general industrial and specialties, and marine lubricants. Within these categories there are hundreds of individual products, including cutting oils, lubricating greases and oils, hydraulic fluids, and rust-arresting compounds.
The primary ingredients in lubricants are base stock (a refined petroleum product) and additives, which impart special qualities to lubricants. Enhancements to base stocks and additives drive improvements in lubricant performance. Most technological improvements focus on creating lubricants that conserve energy and do a better job of controlling deposits. The largest category of base stocks is paraffinics, followed by napthenics and synthetics. Of these three, only synthetic base stocks are expected to grow rapidly—although they account for less than 10 percent of the global base stock market.
Automotive products were one of the major lubricants markets, accounting for well over 50 percent of the total lubricants market in many countries. Within this category, there were three main types of lubricants: crankcase oils (motor oil); transmission and axle lubricants; and fluids for the hydraulic torque converters and fluid couplings in automatic transmissions. Each category was further subdivided by viscosity, the degree of resistance to molecular flow. Automotive lubricants worked by cushioning adjacent metal pieces, oiling moving parts, and keeping dirt out of combustion chambers.
The motor oil market included two major subcategories—the DIY (do-it-yourself) market, for consumers who changed their own oil, and the DIFM (do-it-for-me) market, which included auto dealers, service stations, and the fast-growing quick oil change shops. One of the motor oil growth markets was in synthetics, which were more expensive and lasted much longer than conventional motor oils. Two major brands in this area were Castrol Syntec and Mobil 1. Globally, the trend by the mid-1990s was toward higher-margin synthetic and semi-synthetic oils, which were recommended by luxury car manufacturers such as Bayerische Motoren Werke AG (BMW) and Mercedes.
In the 1960s, the motor oil market in most countries was dominated by service stations that were operated by major gasoline marketers such as Shell and Mobil. However, the international oil crisis in the 1970s spurred the development of self-service gasoline outlets in many western countries, and more consumers began changing their own oil. This opened the door for new outlets to sell motor oil.
By the 1990s, motor oil sales had spread to many retail outlets throughout the world, including automotive chains, parts stores, supermarkets and hypermarkets, and general merchandise chains. This helped companies such as Pennzoil, Castrol, and Quaker State market their products directly to the consumer and take market share away from the major oil companies. For example, in the United States, Pennzoil held the largest share of the DIY motor oil market in 1992 at 18.9 percent, followed by Castrol at 14.5 percent; Quaker State at 11.9 percent; and Texaco and Valvoline, both at 14 percent. In the mid-1990s, these companies were leaders in the global market, with Shell, Texaco, Castrol, Pennzoil, and Quaker State being the top five.
In the mid-1990s, motor oil producers were using increasingly sophisticated marketing efforts to bring their products to the attention of customers worldwide. For example, in 1994 Quaker State launched an extensive and...
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