While historic events in the last three years have disrupted both the demand for finished lubricants and the supply of base stocks needed to produce them, it is logical to ponder what the future may hold for our industry, as demand for lubricants is expected to grow during a period of change related to the energy transition. This is why we must find a way to give our customers worldwide foresight of supply for peace of mind. This effort is manifested by the planning and investment in our business to continue providing our customers with reliable delivery so they can focus on ensuring accurate output to meet their customer’s demand. The challenges our industry faces, such as the refinery feed variation resulting from the Russian-Ukrainian War, global marine fleet upgrades and residual supply chain bottlenecks from COVID-19 show no sign of abating. To better understand the solutions and prepare ourselves for the future, we analyzed the nature of the uncertainty to design a robust manufacturing and distribution footprint for the future.
The Energy Transition Driving Demand for Lubricants
As the world moves to a lower-emission future, we must remember that demand for lubricants and base stocks is not forecasted to decrease. Lubricants enable our customers to conserve energy and resource consumption by reducing friction and wear within their industries.
Manufacturing is the engine of growth for the global economy, whether commercial or industrial, public or private. While the manufacturing market has faced challenges in recent years, rising global demand and ongoing technological advancements continue to have their influence. We can expect this sector to grow annually by more than 3% over the next five years.
Meanwhile, all modes of global transportation — including commercial transportation — are expected to grow from 2023 to 2050. The heaviest growth is expected in large vehicles whose engines cannot be easily replaced by batteries and electric vehicles: marine, aviation and long-haul trucking. The global commercial vehicle market is projected to grow by more than 8% annually throughout this decade. And 80% of the growth is expected in non-OECD countries as populations and GDPs rise, particularly in Asia.
The most transformative of these three sectors, quite possibly, is the solutions technologies, which include carbon capture storage (CCS), wind turbines, and solar panels. These solutions require next-generation lubricants for practical and energy-efficient systems implementation.
There is little doubt that the energy transition will require a realignment of market priorities, presenting new industry needs and opportunities for lubricant manufacturers and blenders. Environmental regulations and fuel economy considerations will increase the need for higher-quality base oils for conventional engines and electric vehicle formulations.
We must continue to tackle the immediate challenges of the energy transition over the next five years and beyond. Regional policies and priorities are driving the energy transformation forward differently, so managing global manufacturing capacity is needed to anticipate global market needs. In an era of geopolitical uncertainty and technological change, lubricant manufacturers and blenders will need an agile, inventive and steadfast base stock supply for the foreseeable future.