where possible, either because of government regulations or out of fear of catching the virus.
Figure 4: Shell Middle Distillate Synthesis Process
Oil refineries are essentially designed to process only one or two (or possibly three) types of crude oil. If the type of crude oil feedstock is changed, the process units will be unable to make the same amounts of products unless they are modified significantly. Also, it is very important to remember that integrated oil refineries are always operated to meet the market demand for gasoline and diesel fuels.
When demand for gasoline and/or diesel is high and/ or prices for gasoline and diesel are high, feedstocks will be routed in oil refineries to maximise gasoline and/or diesel production. When demand and prices for base oils are high, feedstocks will be available for base oil production. Oil refinery managers will liaise with oil product marketers weekly to optimise refinery processing and production. In addition, hydroprocessing used for base oil manufacturing is better able to use poorer quality crude oils that may be less suitable for gasoline and diesel production. Also, very interestingly, hydroprocessing makes better quality base oils than conventional solvent processes for making base oils in an oil refinery.
This caused a rapid fall in demand for transportation fuels, meaning lower refinery throughputs and lower production of feedstocks for base oils. Prices for crude oils fell in March and April 2020, because demand for fuels had fallen. Prices for base oils followed, as illustrated in Figures 5 to 11. As the pandemic progressed during 2020 and 2021, and manufacturing industries continued to function while service and hospitality industries suffered, it became apparent that lower demand for gasoline and diesel had resulted in lower production of base oils, such that by mid-2021 there was a global shortage of base oils, particularly the heavier viscosity grades used in industrial, marine and mining lubricants. The result was that base oil prices shot up in mid-2021 as lubricant manufacturers scrambled to obtain base oils. Prices for higher viscosity grades rose more than for lower viscosity grades for both Group I and Group II base oils, as shown in Figures 5 to 8.
Figure 6:
Indicative Prices for Group I Base Oils, Asia, 2015 to 2021
Figure 7:
Indicative Prices for Group II Base Oils, Western Europe, 2015 to 2021
Figure 5:
Indicative Prices for Group I Base Oils, Western Europe, 2015 to 2021
The price relationships were illustrated very dramatically in 2020 and 2021, during the global COVID-19 pandemic. The pandemic initially caused many people to stay at home or work from home
Figure 6:
Indicative Prices for Group II Base Oils, Asia, 2015 to 2021
Continued on page 16 LUBE MAGAZINE NO.169 JUNE 2022 15
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