Lubricant prices unchanged despite cheap oil

KARACHI: Lubricant makers have yet to reduce prices despite a significant drop in global crude oil prices since mid-2014 and a cut in lube base oil (LBO) rates by a local refinery.

Dealers said lubricants contain 70-90 per cent LBO, depending on the grade, while the rest are additives.

They said the oil marketing companies (OMC) were quick in pushing up the rates on increasing crude oil or LBO price but now they are reluctant to pass on the benefit to the consumers. Many countries have reduced lubricant prices in the wake of falling oil prices.

Stakeholders offered mixed views for not reducing prices. Kenlubes International (Pvt) Ltd CEO Mian Zahid Hussain said there was no direct link between prices of crude oil and lubricating oil.

He also cited a weaker rupee, rising cost of doing business, local taxes and increase in prices of packing material as reasons behind the unchanged prices.

However, lubricating oil prices had been reduced considerably for industrial and processing usage, he said, adding that the National Refinery Limited (NRL) had cut LBO prices by around 23-56pc on different grades since November 2013.

He said OMCs had increased discount rates for distributors and dealers, who should pass on benefit to end-consumers.

OMCs are buying LBO at Rs90 a litre (a drop of 12pc) from the NRL, which produces around 170,000-190,000 tonnes of LBO a year.

The final cost of lubricating oil — including additives, packing material, local taxes, marketing expenses, cost of doing business, cost of utilities, freight, etc — comes to around Rs399 a litre.

Total figures for lubricant production are not available due to a large informal sector. The formal sector’s annual production stands at around 200,000 tonnes, of which 60pc is consumed by the automotive industry.

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