Iran War Is Going to Make Oil Changes More Expensive

Workers inspect vehicles at an oil change location in Indianapolis. (Luke Sharrett/Bloomberg)

The Iran war is throwing a niche corner of the oil market into disarray as fallout from scrambled supply chains for the commodity reaches all the way to the automotive maintenance and industrial sectors. 

Energy inflation is rippling through the U.S. economy with the retail price of gasoline and diesel approaching all-time highs, fueling the worst inflation in years. Now, a broad group of industrial lubricants known as base oils are in very short supply with no signs of easing on the horizon.

The U.S. imports about 44% of its supply of what’s known as Group III base oil, the raw material used to make motor oil, from the Middle East, Independent Lubricant Manufacturers Association CEO Holly Alfano said in an interview with Bloomberg. 

One of the major suppliers of that industrial oil, Shell Plc.’s Pearl GTL facility in Qatar, was damaged in the March 18 attacks on Ras Laffan Industrial City. The oil giant said it will take about a year to repair portions of the energy complex.

“This is just the beginning,” Alfano said. Shortages are imminent and, by next month, finding adequate supply is going to be a major issue, she added.

A confluence of other war-related issues are also hampering U.S. access to the industrial oil, Alfano said. South Korea, which normally supplies Group III oil to the U.S., has seen its production and exports disrupted by the war. And U.S. refiners that make base oil have prioritized producing diesel, another fuel facing a crunch with U.S. inventories at the lowest level in more than 20 years.

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Alfano 

In a March letter to U.S. Energy Secretary Chris Wright, ILMA said that the supply chain disruption has triggered multiple emergency price increases for base oil, and producers have pulled products from the market or placed limits on buyers.  

The American Petroleum Institute has eased some specifications for the oil, which should help alleviate the supply crunch. But for dexos-licensed brands of motor oil — a specific grade developed by General Motors that’s required for most of its vehicles — manufacturers have not been given broad clearance to replace Group III oils without the risk of having their licensing revoked, and they must get approval on a case-by-case basis, according to ILMA.

A spokesperson for General Motors did not immediately respond to a request for comment.

New York City-based motor oil and lubricant wholesaler and producer Lubenet has seen the price of dexos oils jump as much as $5 a gallon in recent weeks.

“That’s enormous,” said Michael Rumore, procurement director for Lubenet, which he said is the final remaining motor oil manufacturer in the city. “It wasn’t done in increments, it was just, ‘Bam, here it is.’ ”

The time between ordering dexos-licensed oil and delivery has also shot up to at least five weeks, Rumore said. Previously, it was around 10 days.