Online Lubricant Sales Set to Gain Traction

Petroleum consultancy sees fivefold increase in online sales by 2005

Little Falls, NJ - April 9, 2002 - Will lubricants e-marketplaces slide down the slippery slope that has been the fate of so many online commodity markets? Or will they gain traction despite themselves and take off faster than greased lightening?

Petroleum industry consultancy Kline & Company thinks the latter scenario is more likely. In fact, a new study from Kline forecasts that online purchases of lubricants will increase more than fivefold over the next four years.

Kline predicts that broader adoption of e-business standards, open-source software and broadband Internet connections will push online lubricant purchases from 6 percent of all lubricant sales transactions in 2001 to an estimated 33 percent in 2005.

This equates to growth from 185 million gallons for online transactions of lubricants in 2001 to 540 million gallons in 2003. By 2005, the total U.S. market for online transactions of lubricants is forecast to reach more than 1 billion gallons, representing an average annual increase of 52 percent from 2001.

"Much of this growth early on is expected to come from such industrial markets as oil and gas extraction, transportation, construction, electrical equipment and power generation, and fabricated metals," says Geeta Agashe, director at Kline. "Such commercial automotive and industrial markets as primary metals, printing, transportation equipment, food processing, machinery and mining are also forecast to join the online transaction bandwagon in a big way during this period."

According to Kline's study, "Selling Lubricants Online 2001," most major oil companies have made significant investments in e-commerce and have implemented a variety of supply-chain-enhancing initiatives. These investments range from building sophisticated private Web sites to participating in public e-marketplaces.

The leaders in e-business initiatives include such stalwarts as Equilon, ChevronTexaco and ExxonMobil, although most of the other major oil companies have made significant investments as well, Kline reports. In addition, many of the startup e-marketplaces have gone out of business, leaving a smaller number of stronger competitors such as FuelQuest, Pantellos and W.W. Grainger.

Thus far it has been a challenge for these companies to convert most of their sales transactions to e-initiatives because their distributors and end users claim to see no clear cost benefit, lack the technology on their end or have a limited education about selling online. And, according to Agashe, "Many end users simply prefer the old-fashioned way of doing business."

However, Kline predicts that several driving forces will push an increasing share of lubricants market online, including new electronic standards that will make data exchange far easier, widely available open-source software and the continuing proliferation of broadband Internet connections. Other factors include more sophisticated but user-friendly trading platforms and the gradual elimination of cultural barriers to online transactions.