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UKLA President’s Report


In April 2020, a barrel of oil was trading at around $21 as the first wave of coronavirus impacted the global economy. At the time of writing, Brent crude has risen to $75 a barrel.


Although the price of oil remains below its 2014 high of $125 a barrel, today’s price does indicate that demand for oil is buoyant and returning to pre-pandemic levels.


Over recent months Spain has reported that lubricant demand is rising and is close to pre-COVID figures, Japan has recorded significant increases in lubricant demand this year, as has France.


We say that demand for lubricants reflects a country’s overall level of economic activity. In 2021, the economies of Europe are proving to be more resilient than some economists had predicted. Pent up consumer spending alongside government’s fiscal incentives to business have helped economies weather the global recession.


That is not to say that the lubricant sector is not facing significant challenges. The pandemic has impacted upon international trade causing disruption to integrated supply chains. Base oil supply has been affected by the


general downturn in economic activity, the closure of European plants for maintenance and the long-term trend for the rationalisation of Group I plants across Europe.


However an oil price of around $75 barrel makes economic sense. It provides certainty for companies to recommence oil field exploration. It gives lubricant companies confidence to continue to invest in product innovations and to continue to make service enhancements that benefit our end users.


In future the use of sustainable raw materials, sourced more locally to produce environmentally-friendly lubricants blended by net zero companies for their discerning consumers could well become normal business practice. An oil price reflecting a company’s investment in serving the needs of its customers today and in the future, is the starting point to a more sustainable sector.


Darren Frogson, UKLA President


UEIL President’s Report


Over the last decades, value chains have become more complex as companies have expanded their business globally, with the value of intermediates traded globally tripling since 2000. The lubricant industry was no exception to this globalisation trend. As supply chains became more complex, businesses focused on minimisation of inventory levels, just-in-time deliveries, and short lead times. Cost efficiency was prioritised over business resilience.


The impact of the COVID pandemic is the most striking evidence of the vulnerabilities of this model. Still, over the last decade our industry had to deal with numerous other supply challenges, with hurricanes and storms disrupting some of the largest US refineries, leading to global shortages of base oils and price surges.


The current base oil and additive availability issues are indeed the combined result of the impact of the COVID pandemic – collateral damage of refineries running at low throughput in response to plunging fuel demand – and exceptional weather events in the US.


The effect on the supply chain of other disruptors such as trade disputes or political events – albeit predictable – should also be factored in, as the impact of political instability on trade has increased over the past decades.


4 LUBE MAGAZINE NO.164 AUGUST 2021


Many analysts expect more trade disputes, higher tariffs, and broader geopolitical uncertainty in the near future.


Yet, it is up to us to choose whether our supply chain will be a cause of vulnerability or the cornerstone of a resilient business model. It is up to us to re-think our supply chain model to find a compromise between cost efficiency and resilience. It is up to us to undertake selected measures before an event occurs to mitigate the impact of a supply disruptor or minimise time for recovery.


Resilience and re-imagination of our businesses will the topic of one of the roundtables at UEIL’s Annual Virtual Congress on October 20 and 21. We have designed a program with a high level of interaction, where, with the help of leading sector experts, we will discuss topics ranging from the EU Green Deal to transformational leadership, from the future of sustainable mobility to the importance of diversity and inclusion in organisations.


I am looking forward to seeing you there to contribute together to the growth of our industry!


Valentina Serra-Holm, UEIL President


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