Australia is confronting a severe shortage of critical lubricants as the ongoing Middle East conflict disrupts global supplies of base oils, the key ingredient in engine oils and other lubricants. The crisis threatens to grind various sectors to a halt, from transportation to agriculture.
What Are Lubricants?
Lubricants, primarily derived from base oils, are essential for cleaning, cooling, and protecting engines from seizing. Most commonly known as motor oil, they are used in everything from lawnmowers to industrial vehicles, mining equipment, and tractors. This makes them a vital component of the oil market.
Gabriella Twining, head of base oils pricing at Argus Media, reports that some major lubricant blenders are already unable to supply factory fill to car manufacturers in Europe, the US, and Asia. Factory fill is the precisely calibrated first oil used in new engines. If the situation deteriorates, dealerships may have to resort to lower-quality blends, compromising engine efficiency and performance.
How Have Prices Changed?
Wholesale base oil prices have surged since the conflict erupted over three months ago, with increases now passing through to consumers. Data from Argus shows that benchmark prices in Asia for group II oil, used in various engine oils, more than doubled from $760 per tonne in late February to $1,790 in early June. Supply of the more refined group III base oils, used in modern synthetic engine oils, is severely constrained.
Several refineries in the Middle East, including plants in Qatar and Bahrain, have been damaged, reducing production capacity. Rebuilding these facilities takes time, and refineries also require stable crude supplies through the Strait of Hormuz—an outcome that remains elusive despite claims of an imminent peace deal.
What Happens Next?
As wholesale prices filter into the retail market, commuters may delay oil changes amid rising cost-of-living pressures. Chris Bright, market development commercial director at Gulf Western Oil, notes that consumers are price-sensitive. “We know in our retail space that as soon as consumers see prices go up, some people say, you know what, I’ll just leave it another 12 months before I service my vehicle,” he says.
Farmers and other oil users face similar dilemmas, potentially leading to reduced crop yields if machinery maintenance is postponed. Electric vehicle owners are unaffected, as EVs do not use engine oil, but they still represent a small fraction of vehicles on Australian roads.
How Exposed Is Australia?
Australia relies heavily on imports from South Korea, Singapore, and Qatar, all impacted by the US-Israel attacks on Iran. Some domestic companies specialize in reusing waste oil, which could become more important amid strained supply. Competition for base oils is intensifying, with refineries targeting higher-paying regions, leaving Australia vulnerable.
The Australian Lubricant Association (ALA) has urged the federal government to treat base oils with the same urgency as transport fuel, including diplomatic trips to Asia. The ALA has requested that Australia’s export credit agency underwrite base oil imports, similar to fuel imports, and that base oil supply be included in bilateral talks in Asia.
Industry participants emphasize that an engine without fuel and an engine without lubricant both stop. A spokesperson for Minister for Industry Tim Ayres said the government is engaging with industries and monitoring key supply chains.
