Prices for base oils, used to make lubricants, are rising sharply and supplies are disrupted, causing concern that Australia is facing a shortage of engine oil and other lubricants used to keep engines running.

While the most immediate effect on commuters could be the pricing and availability of a routine oil change, shortages would affect any sector that relies on combustion engines, including agriculture.

The problem shows how widespread the fallout from the enduring Middle East conflict is, with disruptions extending beyond transport fuel to other crude oil-derived products including everything from plastics to paint thinner.

What are lubricants?

Most commuters understand the importance of lubricants – largely derived from base oils – through motor oil, used to clean, cool, and protect engines from seizing.

The same principle applies to everything from lawnmowers to industrial vehicles, mining equipment and tractors, making them an important corner of the oil market.

The head of base oils pricing at Argus Media, Gabriella Twining, says some major lubricant blenders are already unable to provide factory fill to major car manufacturers in Europe, the US, and Asia.

Factory fill refers to the finely calibrated first oil poured into a new engine at the manufacturing plant.

If the situation worsens, dealerships may need to use poorer quality blends that affect engine efficiency and performance.

How have prices changed?

Wholesale base oil prices have increased significantly since the outbreak of the conflict just over three months ago, and this has started to pass through to consumers.

Data provided by Argus shows that benchmark prices in Asia for group II oil, used in a variety of engine oil and other lubricants, more than doubled from $US760 a tonne in late February to $US1,790 in early June.

Supply of the more highly refined group III base oils, used in modern synthetic engine oils, is severely constrained.

Some refineries that usually produce large quantities of base oils have been damaged in the Middle East conflict, which includes plants in Qatar and Bahrain, reducing the ability to produce lubricants.

Facilities take time to rebuild, and refineries also need crude supplies through the strait of Hormuz to normalise; an outcome that has proven elusive despite numerous claims that a peace deal is imminent.

What happens next?

As wholesale prices filter into the retail market, commuters may start putting off oil changes as they grapple with a slew of cost of living pressures.

The market development commercial director at Gulf Western Oil, Chris Bright, says consumers are sensitive to price changes.

“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,” says Bright.

Other oil users, such as farmers, may need to make similar calculations for their machinery which could even lead to a reduction in crops, especially if fuel supplies continue to be compromised.

Electric vehicle owners are spared the headache, because EVs don’t use engine oil. While electric vehicle sales are booming, they only make up a modest portion of vehicles on Australian roads.

How exposed is Australia?

Australia is largely dependent on imports, including from South Korea, Singapore and Qatar, all of which are affected by the US-Israel attacks on Iran. There are, however, some companies in Australia that specialise in reusing waste oil; which could become more important amid strained supply.

There is already competition between countries for base oils, and refineries will naturally target regions that offer higher prices, potentially leaving Australia exposed.

The Australian Lubricant Association (ALA) has asked the federal government to be more active by treating base oils with the same urgency as it does transport fuel, which has included diplomatic trips to Asia.

The ALA has requested that Australia’s export credit agency start underwriting base oil imports, in the same way it does for fuel. The mechanism is designed to help importers secure supplies.

The association also wants base oil supply included in bilateral talks in Asia.

Industry participants have argued that an engine without fuel and an engine without lubricant end up in the same place – stopped.

A spokesperson for the minister for industry, Tim Ayres, said the government was engaging with a range of industries and monitoring key supply chains.