Friday, 14 August 2015

Base Oil Market Expansion Driven by Automobile and Industry Based Demand and Oil Prices Fluctuations

Base oils are at present acquired through two methods: by refining crude oil or through synthesis of relatively pure compounds. Base oils used for formulating lubricants are vegetable-based, mineral, or synthetic. They are classified according to their chemical structure into naphthenic or paraffinic base oils. The global base oil market is anticipated to reach 39,614.7 kilo tons by 2020 at a sluggish CAGR of 1.4% from 2015. The base oil classification system has been established by The American Petroleum Institute (API). According to this classification, base oils are segmented into 5 main groups. The basis of this classification is the percentage of sulfur content, viscosity index, and saturates.

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Demand for base oils is driven by some key factors that are expected to determine the market’s growth trajectory in the years to come. Population growth and expanding urbanization is likely to lead to escalation in demand for automobiles. The rapid expansion of the automotive industry is predicted to increase the need for lubricants and base oils worldwide. Expansion of the industrial sector in emerging economies such as Brazil, China, India, and Russia is anticipated to fuel the demand for base oils in these regions.

Declining Oil Prices Dictate Pricing Trends

Base oil revenue is negatively affected by plunging crude oil prices. Due to the uncertainty of oil prices, base oil prices are estimated to be unpredictable over the next few years. However, technological advances based on GTL or gas to liquid technology may provide a promising opportunity for the base oil market. The GTL refining process is used for production of high-quality lubricants that have more efficiency.


The growing importance given to fuel economy in new automotive design and stringent regulations about greenhouse gas emissions will lead to the use of high-quality lubricants. The need for environmentally friendly lubricants would result in continuous progression and large-scale transformation of formulation processes for base oils to match ecological standards. The diminishing reserves of sweet crude oil in North America and Europe and sour crude oil’s greater purity and lower price is compelling refiners to switch to sour crude from sweet crude oil. All these factors are collectively aiding the global base oil market’s growth.

Demand for Group II and Group III Base Oils High from Automotive and Industrial Segments

Among the five base oil classification groups, Group 1 base oils had the major market share in 2014 and are expected to continue the growth trend over the next few years, though this group is expected to experience an ebb in demand in Europe and North America.The preference for superior base oils of Group II and Group III in industries is expected to drive these segments of base oils. Currently, Group III is the most preferred base oil for the manufacture of finished lubricants in the automotive sector worldwide. In 2014, the automotive oils application segment had the prime market share in the global base oil market and is anticipated to continue its dominance over the next few years.


Elevated consumption of Group II and Group III base oils has led to new production plants and capacity extensions being added all over the world. Group II base oils are expected to be adopted on a large scale owing to their several performance capabilities over the next few years.

Key players in the global base oil market include Royal Dutch Shell plc., Exxon Mobile Corporation, Chevron Corporation, and SK Lubricants Co. Ltd.

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