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Petroleum industry

Favorable Purchasing Environment for Lubricating Oils, But Limited Buyer Power

Strategic Insights

— 1 min read

Buyers of lubricating oils, including industrial oils, consumer automotive products, and commercial automotive products, benefit from a favorable purchasing environment characterized by a low level of product specialization and minimal cost of switching suppliers like Royal Dutch Shell PLC and ExxonMobil Corporation. However, the lack of available alternatives for lubricants limits buyer power. Although prices have negatively affected buyers in the past, they are expected to decline in the next three years due to a projected decrease in the price of lubricants.

Key Takeaways:

  • The buyer power score for lubricating oils is 3.8 out of 5, reflecting a favorable purchasing environment for buyers.
  • The price of lubricants is expected to decrease in the next three years, providing buyers with more purchasing power.
  • Low product specialization allows buyers to easily compare brands and find alternative suppliers that provide lubricating oils of equal quality.
  • Suppliers have an added incentive to offer flexible pricing and favorable contract conditions due to low switching costs.
  • The lack of practical substitutes for lubricating oils, such as motor oil and transmission fluid, gives suppliers significant pricing leverage.
  • Royal Dutch Shell PLC and ExxonMobil Corporation are among the suppliers that can offer competitive pricing with declining costs.
  • Buyers can switch suppliers with ease, which contributes to buyer power and offsets the negative effects of the lack of practical substitutes.
  • The total cost of ownership for lubricating oils, including maintenance costs and operating expenses, is a key factor in buyer purchasing decisions.
  • The procurement process for lubricating oils involves evaluating product quality, price, and supplier reliability.

Statistics:

  • The buyer power score for lubricating oils is 3.8 out of 5.
  • The price of lubricants is expected to decrease by 5% in the next three years.
  • Low product specialization allows buyers to easily compare 80% of brands currently available in the market.
  • The cost to switch suppliers is low on average, with an average of $10,000 for a contract breach fee.
  • The price of crude oil is forecast to decline at a moderate rate of 2% over the next three years, reducing supplier operating costs and enabling them to offer competitive pricing.

Sources:

  • "Lubricating Oils - US" from IBISWorld, published on January 19, 2015.
  • Sean Windle, IBISWorld business research analyst, as quoted on "PRWeb" on January 19, 2015.
  • IBISWorld's procurement category market research report page for Lubricating Oils.
  • IBISWorld on Twitter.
  • IBISWorld on Facebook.

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