Bonus Content
The Lubricant Supply Crisis: What the Industry Needs to Do Now
TLT Lubricant Supply August 2026
Industry leaders from ILMA, API, NLGI and STLE gathered at a special session to address the growing lubricant supply crisis, and what formulators, suppliers and end-users must do before inventories run out.
Panelists:
• Dennis Bachelder, American Petroleum Institute
• Neil Canter, Chemical Solutions
• James P. Carroll, Schaeffer Manufacturing and ILMA President
• Gary Dudley, GKD Consulting and NLGI Representative
• Moderator: Doug Sackett, Dilmar Oil Company
The warning signs have been building for months. With ongoing geopolitical disruptions choking the flow of crude oil through key maritime straits, the lubricants industry is staring down a supply crisis that most consumers are starting to feel, but that insiders say will get worse before it gets better.
At a special STLE session devoted entirely to the topic, four panelists with deep expertise in lubricant manufacturing, base oil chemistry, certification and raw materials offered a candid assessment: inventory buffers are masking the severity of the situation, the cascade into additives and alternative base stocks has only begun and companies that aren’t acting now are running out of runway.
The scale of the problem
The immediate flashpoint is Group III base stock, the synthetic-grade base oil that underpins modern low-viscosity engine oils. Speakers at an ILMA Engage meeting one month prior, drawing on data from ICIS and Argus, delivered a sobering timeline: even if supply disruptions ended today, recovery to normal supply levels would not come until early next year, at the earliest.
“If everything stopped today and the Strait of Hormuz was open today, we would not be back to normal until sometime early next year,” said James Carroll, president of ILMA and executive vice president of Schaeffer Manufacturing. “That was a month ago, so you can add a month to that.”
New Group III capacity is coming online in the U.S. ExxonMobil is opening a facility in Baytown, Texas, in early 2028, at approximately 8,000 barrels per day, but that offers no near-term relief.
The reason many haven’t felt the crisis yet, Carroll argued, is that inventories haven’t fully drawn down. “A lot has to do with the fact that inventory hasn’t run out yet,” he said. “Once inventory is drawn down, then we’re really going to see a lot of problems.” ILMA has been speaking with Bloomberg, CNN and the Wall Street Journal, outlets that, until recently, were unaware a crisis was unfolding.
The cascade effect: Group II, PAO and additives
Group III is not the only base stock under pressure. As formulators pivot to Group II as a substitute, those supplies are tightening too, driven in part by refinery economics. With fuel margins (diesel and aviation gas) outpacing base stock margins, refiners have less incentive to maximize base stock output.
PAO is similarly strained. “Low-viscosity PAO (4- to 6-centistoke) is tight if not on allocation,” said Neil Canter, Chemical Solutions, and STLE technical advisor. That pressure is pushing formulators toward esters and other alternatives, but renewable feedstocks face their own supply competition, particularly from the sustainable aviation fuel market, which draws on the same palm, palm kernel and coconut inputs used in ester synthesis.
The additive chain is at risk, too. Most additives are petrochemical-based, and if propylene and ethylene face shortages, the cascade runs through all additive types, including detergents, dispersants, emulsifiers and extreme pressure (EP) agents. Canter also flagged emerging price pressure on sulfur-based chemistries (sulfur prices have more than doubled in 11 weeks) and anticipated downstream pressure on phosphorus-based additives like tricresyl phosphate.
One application that is receiving much attention currently, but the consequences from a lubricant base stock supply perspective have not been thought out, are data centers. “Hundreds of new data centers are coming online in China and the U.S. right now,” Canter noted. “A number of them will need single-phase immersion cooling fluids. Where are those going to come from?”
What formulators and manufacturers need to do
The panel’s advice for manufacturers and formulators was direct and practical: act now, before inventory runs out.
Gary Dudley, GKD Consulting, and representing NLGI, urged companies to revisit their COVID-era playbooks. “Start talking to your secondary suppliers. If you’re carrying 30 days of inventory, should you go to 90? Think more strategically. If you don’t have contracts in place with your additive suppliers, get them. If force majeure is declared, contract holders may still receive material, maybe 30%. Without a contract, you know where you stand.”
Canter urged formulators to rationalize their product lines. “Many companies have 500 to 1,000 products. Do you need all of them? Apply the 80-20 rule. And develop duplicate or triplicate formulations for key products; many companies have prior-generation formulations in their files from four or five years ago that would still do the job.” He acknowledged that this is harder where formal specifications apply, but emphasized that “something slightly less optimal is better than nothing.”
Dudley added an operational angle that’s easy to overlook: “Take a close look at your blending operations. Watch your line flushes; if a line is full of PAO, capture it and use it. If your viscosity spec runs 10 to 20 centistokes and you’re blending at 18, move toward 12 and free up more PAO. These things add up.”
On the research side, Dudley urged formulators to revisit old development files. “If you have a 20-year-old formulation, go back to the original formulator. They may have evaluated alternatives that were passed over for cost reasons but that are already proven. That self-help at the research stage can save you significant pain later.”
API’s emergency provisional licensing
American Petroleum Institute (API) has created a specific mechanism to help formulators navigate the shortage: Emergency Provisional Licensing, which allows for formulation substitutions without triggering re-qualification requirements or label changes, provided the substitution can be shown not to degrade performance.
“The label change is tied to the service category, and it’s the service category we’re protecting,” said Dennis Bachelder of API. The initial license is set for 90 days and will be renewed as needed. “Wars and political disruptions are more volatile and unpredictable than natural disasters,” Bachelder acknowledged. “We’ve built in the ability to renew on a 90-day cycle, and we expect to do that more than once.”
As of the session, API had approved two applications and was reviewing preliminary information for approximately half a dozen more. Turnaround time on a complete application is roughly two weeks. The primary pathway is Group III-to-Group III interchange; Group II-to-Group III substitution is possible but more data-intensive. Bachelder confirmed that API is “committed to working with the industry to maintain flexibility as long as we keep the performance of the product at its current levels.”
NLGI noted that a similar approach is available for grease certifications. “Reach out early, submit your situation and we’ll work through it on a case-by-case basis,” Dudley said. “Get in front of the committee before you make a change, not after.”
Managing demand: Longer intervals, oil analysis and consumer education
Supply-side interventions alone won’t close the gap. The panel pointed to demand-side management as equally important, and noted that consumer education will be central to making it work.
Automakers are already beginning to move. Toyota, Nissan and Honda are allowing slightly higher viscosity grades and extending recommended change intervals for some low-viscosity applications. Toyota has specifically recommended that consumers use a 0W-20 for one interval instead of a 0W-16 to reduce demand on Group III-dependent grades.
In industrial settings, Doug Sackett of Dilmar Oil Company, the moderator, noted that most plants are already over-greasing, and that implementing precision greasing through tools like ultrasonic monitoring can meaningfully reduce consumption. “When you teach them to properly grease, their consumption will go down,” he said. The session’s broader call was for STLE professionals, particularly STLE Certified Lubrication Specialist™ (CLS) and STLE Certified Oil Monitoring Analyst™ (OMA) certificate holders, to take an active role in educating end-users on condition-based maintenance and oil analysis.
Canter pointed to a longer-term value proposition that the crisis may make easier to communicate: “For years, the main decision on picking a lubricant for a specific application has been price. With the potential onset of a supply crisis and with pricing steadily increasing, end-users will need to consider the value a lubricant provides to them even if it is more expensive. A better lubricant should provide end-users with better performance, and an extended operating life. This is the case the lubricant industry has been trying to make for many years. In moving to a higher valued lubricant, the end-user should realize improved productivity, reduced energy use, cost savings and reduced emissions. This crisis may finally give us the opening to make that case.”
The session closed with a unified message from panelists: be transparent, be flexible and start now. “We’re in a crisis, but this presents us with a major opportunity,” Canter said. “We’ve got to work together to solve problems collectively so we can all get through this, because things are going to get worse before they get better.”