What if the current oil price is the new reality?
While Shell’s recent report anticipates a recovering oil price, the deceleration of the Chinese growth engine has meant three of the other BRICS are suffering from the collapse of the minerals prices including, of course, oil.
Those territories which where were providing excitement to the global economy a few years ago are now slipping badly. As a result, the US and non-China AsiaPacific countries are regaining strength and benefitting disproportionately from the lower oil price stimulus to their economies. This sounds a little like the story of the tortoise and the hare. In this case, it's a matter of just keeping growing at a steady pace - as the US has done - to stay ahead in the lubricants demands race.
The oil majors are certainly feeling the effects of the reduced oil price, with gloomy Q2 2015 reports all round. Only downstream operator, Phillips 66 was able to buck the trend. Meanwhile the miners and the big construction builders, such as Caterpillar, are suffering as a result of the stagnating global economy, although one can only speculate as to whether this has directly influenced CAT's recent decision to bring vocational vehicle design and production back in-house.
However, the “pure” Lubes businesses have seen a surge in earnings, with Valvoline reporting a 17% increase and a Quarterly record. Similarly Fuchs reported sustained business strength, despite the flat European markets, with sales growing by 10% in the first quarter and improved earnings.
In addition Fuchs have been on the purchase trail again, picking up both Pentosin and Statoil’s lubricants business, strengthening is presence in both Brazil and Europe. On the other hand, Shell has been reducing its Japanese position, selling the majority of its stake in Japanese Shell to Idemitsu Kosan.
Certainly for some, the fluctuating oil price continues to create opportunities. For most, it means a change in perspective on product development. Traditionally, oil companies used to offer as many as 1000 products, each covering one or two specifications. Now, with continued rationalisation they have more like provide 250 products but expect each of them to cover as many as nine different specifications. The impact on product matching is considerable.
The use of internet-based technologies has allowed lube producers to combine art with science. This is particularly evident in Shell's ground-breaking Virtual Assistant. This web-based service combines product information with artificial intelligence technology to provide consumers with the most accurate product information available.
Making lubricant recommendations is about balancing the technical risks with the marketing display options. That is exactly what OATS' new Product Manager is designed to do – provide the extra flexibility that companies now require.
To find out more talk to us today and let us show you the impact of the new OATS data structure and the benefits to your organisation.
OATS is also working on a new structure to this regular Bulletin. The new format will begin in October, so this will be the last of the current Global Bulletins. We hope you will find the new style just as informative and convenient to read. In the meatime, if you would like to comment on anything you have read in this month's Bulletin, simply contact us by e-mail or follow our updates on social media via Twitter, Facebook, LinkedIn and Google+.
Sebastian Crawshaw
Chairman - OATS