Costco has started rationing its Kirkland Signature motor oil due to a global shortage of a vital ingredient used in synthetic lubricants, causing prices to spike. A 10-quart pack that used to cost around $30 is now priced at nearly $58.
The retailer is limiting purchases to two packs per member every week as supplies of high-quality base oils remain tight because of disruptions, particularly in the Middle East.
On Costco’s website, a two-pack of Kirkland Signature’s 0W-20 and 5W-20 full synthetic motor oil is listed for $57.99.
This is almost double the previous price of about $30 for the Kirkland oil, according to reports.
As motor oil prices climb, fuel costs have also surged. The latest data from the Energy Information Administration notes that regular gasoline is averaging $4.16 per gallon, while diesel has hit records at $5.97. More recent AAA numbers show diesel prices exceeding $6 per gallon, with regular gasoline nearing $4.29.
Meanwhile, crude oil prices have risen back above $100 a barrel, further straining motor oil manufacturers who are already facing shortages of premium Group III base oils. This situation has prompted refiners to focus more on producing high-margin fuels like gasoline and jet fuel.
The limitation on motor oil purchases is somewhat unusual since this product typically has a long shelf life and is easily stored for future oil changes.
The issues primarily revolve around Group III base oil, a highly refined product essential for making full-synthetic and low-viscosity motor oils. Andrew Lipow, president of Lipow Oil Associates, highlighted that the current supply crisis predominantly affects these premium base stocks.
He noted that Qatar, the UAE, and Korea are key providers of Group III base oils, which are crucial for synthetic motor oils and blends due to their superior performance characteristics.
According to Lipow, this supply crunch is making its way through the supply chain, hitting packaging plants first and then retailers.
Historically, 44% of the U.S. demand for Group III base oil came from the Persian Gulf, but much of that supply has been disrupted this year, especially due to ongoing conflicts affecting major producers in Qatar, Bahrain, and the UAE.
Significant damage at Shell’s Pearl gas-to-liquids facility in Qatar, which once provided around 30,000 barrels daily, has been a major blow. Repairs might take at least a year to complete.
The situation remains problematic even as shipping conditions improve since damaged production and depleted inventories cannot be quickly replenished, leaving manufacturers scrambling for alternatives, sometimes from South Korea, which also relies heavily on Middle Eastern crude.
As supply pressures continue, lubricant prices have surged. The producer price index for finished lubricants increased by about 15.8% from March to August, while a survey indicated a 24.2% hike in retail prices from February to August across 97 motor oil products.
Companies like Valvoline mention that higher lubricant costs are adding approximately $5 to $7 to the price of an oil change.
And, unfortunately, it seems that relief might be a long way off. The Independent Lubricant Manufacturers Association has warned that U.S. base oil market pressures may persist until 2027 when new domestic Group III capacity is expected to come online.
Costco has been approached for comments regarding the situation.
