Lubricant supply crisis update

TLT Bonus Content | December 2026

Industry leaders share new details on emergency provisional licensing, the latest on the Group III base stock shortage and a first look at when relief might finally arrive.

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CONTRIBUTORS
• Dennis Bachelder, Senior Engineer, Engine Oil Licensing and Certification System (EOLCS), American Petroleum Institute (API)
• Holly Alfano, Chief Executive Officer, Independent Lubricant Manufacturers Association (ILMA)
• Moderator: Doug Sackett, Senior Technical Advisor, Dilmar Oil Co., Inc.; STLE Executive Committee Member

STLE's lubricant supply crisis coverage continued with a webinar in August to follow up on the discussion held during the 2026 STLE Annual Meeting: Innovating Through Tribology and Lubrication. Dennis Bachelder from API and Holly Alfano from ILMA joined moderator Doug Sackett for a follow up to the panel discussion the three held earlier this year in New Orleans. This article is based on the webinar, titled The Lubricant Supply Crisis: What the Industry Needs To Do Now. Watch the full recording at https://www.pathlms.com/stle/webinars/150500.

In May, the tone had been cautiously optimistic that the Group III base stock shortage triggered by conflict in the Middle East might be nearing resolution. Three months later, that optimism has given way to a longer runway. "This is an evolving situation," Sackett told attendees, recalling the panel's earlier hopes. "We were optimistic thinking we would be over that at this point." Instead, continued disruption to Group III base stock production, concentrated in the Middle East, the U.S. and Korea, has pushed API to formally open its emergency provisional licensing (EPL) program, giving licensees a path to substitute base stocks or additives without losing their certification marks.

API opens the emergency licensing process
Bachelder, who oversees the Engine Oil Licensing and Certification System (EOLCS) at API, walked attendees through the mechanics of the program. "If the supply of a base oil or an additive by a number of licensees is disrupted, licensees may apply for a short-term emergency provisional license," he said. The provision, drawn from Section 6.9 of API 1509, predates the current crisis but had rarely been invoked until pressure from organizations including ILMA pushed API to formally activate it in March, when a letter went out to all API engine oil licensees announcing that EPL was open for the ILSAC and API service categories.

To apply, a licensee must identify which base oils or additives are in short supply, describe the disruptive event (in this case, the war-related base stock shortage) and confirm the shortage wasn't caused by its own negligence. A granted license runs for an initial 90 days and can be extended at API's discretion. The application package includes a description of the substitution being made, a list of affected products by viscosity grade and service category and a schedule of engine and physical property tests the licensee commits to running over time to confirm performance hasn't slipped.

Uptake so far has been modest but real. "We've had about a dozen companies fill out the form for provisional licensing and provide initial data," Bachelder said, noting each company typically requests coverage for three to six products. "So somewhere 36 to 72 products have been granted EPL."

Tracing the disruption
Much of the current shortage traces back to a single facility: a plant in Qatar that is the major source of Group III base stock. "There are two issues with that location on their supply," Bachelder explained. "It's not just the refinery of the base stock that is damaged. It is the supply of gas to the refinery." He estimated recovery at "six months or more because of the damage to the refineries." Sackett added that base oil has borne the brunt of the disruption precisely because refiners prioritize the fuel side of their output: "The biggest loser has been base oil, because it's all about business for these refineries and they're getting so much for the fuel side of it."

The ripple effects extend to additives: sulfur, a key input that was already under pressure earlier in the year, had climbed to roughly $890 per ton by June, Sackett noted. There were bright spots, too. Alfano relayed a same-day post from the U.S. Secretary of Energy reporting that, thanks to coordinated U.S. and allied naval escorts, the seven-day average for oil leaving the Strait of Hormuz had climbed to almost 9 million barrels per day, with another 5 million barrels or so moving through newly upgraded regional pipelines. Oil prices have eased as well, with OPEC and the IEA trimming demand forecasts by roughly 600,000 barrels a day, according to Reuters.¹

The panel cautioned against reading too much into the improved flow numbers. "We don't have the details of what products are coming out of the strait," Alfano said. "And I would imagine there's probably not a lot of base oil" among them.

Guarding quality while supply tightens
During the webinar, many attendees had the same question: will the shortage push producers toward cheaper, lower-quality substitutes? Sackett didn't mince words about the guardrail that prevents it. "I could make engine oil with orange juice as long as I met those specs, which we know it won't," he said, underscoring that API licensing is specification driven. API doesn't regulate what goes into a formulation, only whether the finished product meets performance requirements, which it verifies in part by pulling samples off retail shelves for testing.

Bachelder reinforced that the EPL program doesn't relax that bar. "The presentation assumes that all products that are licensed by API are certified that the performance meets the required specification," he said, "and that when there are changes to the formulation, we ask that there is evidence that the change will not adversely impact the overall quality and performance of the engine." Alfano described a parallel check on its own members: "What we have is a code of ethics. We also pull members' products to make sure that they meet the standard or meet the specification that they are claiming on the label. We don't set any of the specifications, but what we do is require that members operate in an ethical manner and that their products are what they claim."

Beyond the engine: hydraulic, turbine and industrial fluids
Asked whether the crisis is spilling into other product categories, Alfano said she hasn't heard of specific hydraulic fluid impacts but that base oil supply "is tightened" more broadly, with prices up across the board. Sackett pointed to reports of trouble sourcing Group II turbine oil, noting that supply and demand vary by manufacturer, so buyers may need to look at second-source options. Synthetic, Group IV-based products such as compressor and gear oils appear less pressured for now, largely because their longer drain intervals buy more time, a topic STLE plans to explore in an upcoming webinar on extended drain intervals.

Bachelder used a technical question about base oil interchange to clarify where the actual pressure point sits. Group IV base stocks (PAO) allow wide interchange and can, under the established rules, sometimes substitute upward for Group III, but not the reverse. "You cannot use a Group II for a Group IV," he said. Right now, Group III is the base stock genuinely in short supply; PAO carries some restrictions of its own but nowhere near the same scale. On the additive side, Alfano said additive makers are facing the same supply pressures as everyone else and urged formulators to "stay close to your supplier" during this period. Bachelder added that most additive plants sit outside the Middle East, unlike base stock refineries, which are typically built adjacent to a fuel refinery, giving the additive supply chain somewhat more flexibility, even though it isn't immune.

Re-refined base stocks and other questions from the floor
Attendees pushed the panel on a few other angles. One asked about the role re-refined Group III base oils might play over the next three to five years. Sackett noted he'd recently visited a refiner that is ramping up re-refined output specifically to help fill the Group III gap. Alfano confirmed she's hearing the same thing, "but I think a lot of their supply is committed" already. Bachelder added a technical clarification: API doesn't formally distinguish re-refined from virgin base stock in its licensing standards. "We have not specifically singled out re-refined versus mineral oil," he said. API evaluates whatever base stock a refiner submits on its performance data, and re-refiners have long supplied engine oil base stock under that same approach without labeling it as such.

A related question asked whether API is coordinating with Association des Constructeurs Européens d'Automobiles (ACEA), the European engine oil sequence body, on a shared approach to base oil interchange for OEMs on both sides of the Atlantic. "There is not an active collaboration," Bachelder said, though the two groups occasionally share technical information; ACEA, he noted, appears to be moving toward principles similar to API's own base oil interchange rules, though he couldn't confirm details. He was equally direct about individual OEMs: automakers control their own base oil interchange decisions for OEM-specific specifications, and "API cannot even begin to address that. We talk to them, but we do not speak for them."

Asked about recycling used engine oil to offset the base stock shortfall, Bachelder said re-refining used oil follows a process much like refining crude, and that historical performance data shows a well re-refined base stock "begins to match the quality of crude oil." Sackett framed it as a sustainability win as much as a supply one, giving used oil "another circular life" rather than treating re-refining as a stopgap alone.

Relief is coming, just not soon
New domestic Group III capacity is on the way; both Bachelder and Alfano pointed to U.S.-based plants opening or expanding capacity in the coming months. Sackett said the domestic angle matters beyond raw volume as it cuts out the shipping time built into today's supply chain, in which base stock can travel through the Strait of Hormuz to a supplier in Korea and back, a round trip he estimated at roughly two months.

But refinery conversions aren't quick. "It takes years, because it needs new equipment, new catalyst," Bachelder said. "It's a highly technical and highly specific process." Converting a Group I refinery to Group III output is essentially impractical; Group II-to-Group III conversions are achievable, both planned U.S. projects started as Group II facilities, but still require years of lead time. Alfano summed up the uncertainty that colored the entire session: "There's a lot of information that we don't have. Every day is a new day and we're getting more information, but are still not sure about the timeline."

Conclusion
With time running short, Sackett closed by asking Alfano and Bachelder for their read on where things go from here. Alfano pointed back to relationships: "Your relationships with your suppliers have never been more important," she said, stressing good communication and reliable information from suppliers as the war's daily twists keep shifting the picture. "The strait is still really not open," she noted, aside from the limited exceptions cited earlier. In her view, new U.S. Group III capacity is the real key, even if it won't arrive "tomorrow," and she urged members to study Bachelder's EPL guidance closely, calling his walkthrough of the application process a genuine help.

Bachelder echoed the call to "stay close to your suppliers," since additive and base oil suppliers are often the first to know what substitutions are workable. He reiterated that EPL exists precisely to allow that kind of substitution without the full data package a certified engine oil normally requires and reminded attendees the mechanism isn't new or unique to this crisis; API also used it after a Gulf Coast hurricane disrupted base stocks and additives in years past. Looking ahead, he tied the outlook to two forces: how quickly Middle East supply chains reopen, and how fast new U.S. Group III capacity comes online, capacity that could eventually create a surplus rather than a shortage. "The flexibility is being built in, added capacity is being built in," he said, "and both of them will speak well for the future."

Sackett closed the session on a practical note, telling attendees this could be STLE's last check-in webinar on the crisis if conditions stabilize, or the first of another round if they don't. Either way, he distilled the panel's guidance into three takeaways for lubricant professionals: talk to your OEMs and suppliers, confirm your formulations are correct and compliant and keep your customers informed.

REFERENCE
1. https://www.markets.com/news/oil-prices-fall-opec-iea-2026-demand