Global Lubricant Consumption

Many hurdles in the way of industry growth for re-refined used oil

With continuing technological advances, re-refining of used oil can produce basestocks that are almost on par with conventional virgin basestocks. While from a purely environmental perspective re-refining of used oil is preferable, economic considerations do not always favor this option. As Kline and Company points out in their latest study Global Used Oil 2009, there is a significant variation in how used oil is handled on both international and regional levels due to differences in consumer attitudes and the differences in the economic value of different disposal options.

The alternative to re-refining is energy recovery by combustion. It is considerably cheaper and less complicated to prepare used oil for fuel applications. The process of collecting, testing, re-refining, and marketing of re-refined basestocks can only be justified if the end product can compete with virgin oil basestock. One of the scenarios in which this is possible is if crude oil prices remain high, increasing the cost of virgin basestocks.

Europe has one of the most developed re-refining industries. Consumer responsibility and government regulations and subsidies have ensured that high quantities of used oil are collected. However, a problem of scale exists. As the re-refining industry grows, the competition among used oil buyers is also growing. In order to expand, European re-refiners will have to look to buy from other parts of the world or relocate directly. Both of these scenarios pose significant difficulties as regulations and limitations on used oil imports are very stringent.

In North America, there is scope for the re-refining industry to grow. However, the region is experiencing its own hurdles for this industry’s expansion. Paramount is the need for attitudes to change, as much of the collected oil is currently burned. More re-refining capacity addition is required to expand the industry. Some involvement by government agencies is taking place, however, it remains regional and encouragement commensurate to the European-level is not present.

Broadly speaking, the remainder of the world suffers from a lack of regulation and enforcement. Unofficial channels of collection prevail. Consequently, application varies considerably; some is burned for fuel, some re-used as lubricant without appropriate treatment.

Re-refined lubricants are an emerging product category and have generated a lot of interest in 2009. In developed markets, the improved quality of re-refined basestocks have changed consumer perceptions that re-refined baseoil lubricants are second-rate, further improving demand. However, particularly in Europe, we are approaching the point where added capacity is going to drive up the price of used oil and end-products derived from it.

To hear more interesting insights from Kline’s study Global Used Oil 2009, register now for the free webex presentation by energy industry manager Milind Phadke.

Webex Presentation – Tuesday 7th September, 2010

10:00 AM EDT

02:00 PM GMT

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