From Crude to Base Oil to Lubricant

Do you know that based on the data from EIA ( Energy Information Administration), every 42 gallon of Crude produce only 1% of base stock which is used for Lubricants?

In the current Pandemic situation when airplanes are not flying and the restriction of car movement in various countries, the demand of Jet Fuel , Gasoline will go down.

What will it imply for price of base stock for Lubricant?

What will logically happen is that producer tend to reduce the output since it is no point stockpiling up the jet fuel and Gasoline when there is no demand. This will in turn reduce the output of the base oil as we understand from the table below that to produce 1% of base stock, we will need to produce 9% of Jet Fuel and 49% of Gasoline.

At the time of writing, base stock used for lubricant is facing a tight situation amid the increase demand from Asia, especially china. It is creating a situation whereby producers are trying to secure the supply to meet with the demand.

The basic demand and supply theory will suggest that when the supply is scare and demand is more than supply, price will tend to increase to reach the equivalent price stability

Source: U.S Energy Information Administration, Petroleum Supply Annual, August 2020