The global base oil market size was USD 28.32 billion in 2015. Increasing utilization of lubricants in end-use industries such as industrial and automotive is expected to remain a key driving factor over the forecast period.
Base oils are a major constituent of any lubricant, which meets certain criteria such as viscosity, oxidation, pour point, seal compatibility, additive solubility and thermal stability. Growing adoption of Group II and Group III base oil owing to increasing ground transportation, aviation, and commercial road transportation is anticipated to support growth over the next eight years.
China base oil market revenue by product, 2014 - 2024 (USD Million)
The surge in this market can be attributed to the growing concerns regarding environmental degradation and the subsequent rise in demand for alternative, sustainable products with lower carbon footprints.
Furthermore, the recent slump in crude oil prices has negatively affected the base oil market. Lower prices and less impurity of crude oil in regions such as North America and Europe is forcing refiners to change their preference of crude oil to sour crude hence decreasing the base oil yield from crude oil which would likely to impact the base oil market negatively.
Stringent environmental regulations such as the Corporate Average Fuel Economy (CAFE) norm have resulted in the need for exploring new ways to reduce fuel consumption. This is expected to drive lubricants demand in automobiles across the globe, especially in developed regions such as North America & Europe.
Group I base oil is the dominant application segment accounted for about over half of the global volume in 2015. The product segment is expected to lose some of its market shares to group II and group III base oils since they are capable of offering enhanced performance and are comparatively purer.
It is the least refined base oil category which is produced by the process of solvent refining. It usually consists of conventional petro-based base oils. Since these oils are produced by solvent refining which is a comparatively easy process, they are available at a very low cost in the market.
Group II base oil is expected to be the fastest growing product segment over the forecast period. Currently, Group II base oils are commonly used in mineral based motor oils available in the market
They impart viscosity index in between the range of 80 to 120. Since all the hydrocarbon molecules are saturated for these oils, they tend to offer better antioxidant properties. Additionally, they are more clear. However, they cost more than group I base oils owing to the change in the production process.
Automotive oil is the dominant application segment accounted for about over 40% of overall volume in 2015. The rapid growth of automotive industry in emerging countries such as China, India, Thailand and South Korea is expected to drive the application segment. Furthermore, the shift towards better fuel economy and stricter emission norms is in turn increasing the demand for finished lubricants and base oils.
Consumers are increasingly demanding better performance and high mileage vehicles owing to the rising awareness amongst them regarding vehicle usage that the vehicles are not to be replaced in the short run. Automotive oil application segment is expected to be followed by process oil regarding revenue is growing at an estimated CAGR of over 5.5% over the forecast period.
Utilization of automotive oils in diverse automotive lubricating applications is expected to fuel the market growth. Automotive base oils are used for reducing the volatility of emulsions. Synthetic oils are made for high tech engines like that of Mercedes-Benz. If automotive oil passes certain special tests, it implies that they have superior, long lasting performance.
Process oil is used as a raw material or as a processing aid in the personal care, rubber, polymer and textile industries. They exhibit superior properties such as chemical stability, better lubrication in low temperatures, resistance to oxidation and improved fuel economy for the engines. Increasing demand for chemicals primarily in Asia Pacific is expected to drive their production.
Asia Pacific market accounted for over half of the global volume in 2015. The demand for base oils in Asia Pacific is expected to be driven by the development of automotive industry along with the resultant demand for finished lubricants to improve the operational efficiency of the vehicle imparting longer life.
Automotive oils are likely to retain their dominance in the Asia Pacific market owing to high passenger car and commercial vehicle sales, along with the rising awareness regarding emission reduction standards and legislations which are promoting efficiency in these vehicles.
Europe was the second largest market, accounting for over 20% of the overall volume in 2015. Improving automotive sectors in Germany, UK, France and Italy post the Euro zone crisis on account of technological innovations is a crucial determinant for industry growth. However, the recent scandal regarding involving the German brand Volkswagen about carbon emissions has negatively impacted regional automotive growth.
Central & South America and the Middle East & Africa are expected to witness substantial growth. Rapid urbanization, increasing crude oil production and industrial sector growth are some of the major factors impacting base oil demand in the regions. Rising demand for Group II and Group III base oil is anticipated to further strengthen the regional industry.
The global base oil industry is a highly fragmented market with the presence of a large number of small as well as large scale companies. Major industry participants include ExxonMobil, Chevron Corp., British Petroleum PLC, Royal Dutch Shell, Sepahan Oil Company, LukOil, Saudi Aramco, S-Oil Corp., Indian Oil Corp. Ltd., Total, Motul, Repsol, Gulf Oil UAE, Petrobras, and Tupras.
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