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The ongoing COVID-19 pandemic is truly an all-encompassing
event, with no corner of the globe or sector of the economy
escaping unscathed. Lubricants are no exception, though there is
nuance to the story.
Approximately 61% of global inland lubricants demand (excluding
international marine lubricants) is accounted for by the
transportation sector; that is, the lubrication of engines and
parts within cars, trucks, planes, boats, and other moving
vehicles. Not unsurprisingly, demand from this sector is quite
vulnerable in the near-term since the movement of people and goods
is being hammered by government lockdown measures and social
distancing. Moreover, transport sector lubricants consumption is
expected to fall faster than transport fuels demand as economic
pressures will lead many vehicle owners to delay oil changes,
stretching drain intervals beyond usual levels. Specifically, IHS
Markit expects an approximately 10% decline in global motor fuels
demand this year, but a nearly 14% drop in transport sector
lubricants consumption.
The remaining 39% of inland lubricants demand is associated with
industrial or commercial activity; think factories or other heavy
manufacturing plants. Consumption here will also decline as
COVID-19 crimps broader economic activity the world over. However,
preliminary projections suggest that the rate of decline will be
far less - around 3% in 2020 - than that for transport sector
lubricants.
Figure 1: Total inland lubricants demand - World
All this adds up to an approximately 9.5% decrease in global
inland lubricants consumption this year. For comparison, demand
destruction during the Great Recession peaked at just 7.2% in 2009.
Truly, as with all things COVID-19, this is an unprecedented time
for the global lubricants sector.
A full assessment of the corresponding impacts on the base oil
sector will be available in August 2020 via the annual base oil
supply/demand balance update from the Global Base Oils Service.
