Key Points

As the situation involving Iran continues to develop, a global shortage of base oils is beginning to affect owners of luxury vehicles. Supercar engines are highly dependent on base oils, which are capable of withstanding extreme temperatures, high rotational speeds, and intense pressure. Gabriella Twining, Head of Base Oil Pricing at Argus Media, told CNBC that without new supply sources, existing inventories could be depleted within a month, directly reducing the production of finished lubricants.

On January 4, 2026, a limited-edition Ferrari SF90 XX Spider plug-in hybrid supercar was parked on London's Bond Street, with another red Ferrari driving past. Bond Street, located in London's West End, is a premier luxury shopping district that has been a hub for high-end fashion and jewelry since the 18th century. As conflict persists involving Iran, a global shortage of base oil supply is starting to impact luxury car owners. Analysts and industry bodies warn that if the situation remains deadlocked, base oil stocks could be exhausted rapidly. Ongoing disruptions to shipping through the Strait of Hormuz continue to intensify. The International Energy Agency has described it as the most severe energy security threat in history, and the effects of this supply shock have extended far beyond crude oil, fertilizers, and helium. Base oils are a core raw material for producing high-performance lubricants, engine oils, and industrial fluids. Group III and Group IV base oils (such as Polyalphaolefins or PAO) are essential components for automotive synthetic finished lubricants, with PAO being particularly critical for luxury and high-performance vehicles. According to Argus Media data, the Gulf region contributes 20% of global Group III base oil production capacity. Last year, 72% of Europe's Group III base oil imports and 47% of US imports originated from the Gulf region. Supercars, which are highly concentrated in major cities like London, Monaco, and Los Angeles, require these specialized base oils because they can endure extreme heat, high engine speeds, and intense pressure. Gabriella Twining, Head of Base Oil Pricing at Argus Media, stated in a telephone interview with CNBC: "As the name suggests, base oils are the foundational raw material for all finished lubricants, covering automotive, industrial, aviation, and maritime sectors. Any machinery that operates requires lubricants, and the raw material for those lubricants is base oil."

In recent weeks, base oil prices monitored by Argus have surged to record highs. Since the escalation of the Iran situation, prices for Group III base oils in Northwest Europe have nearly doubled. Multiple negative factors are converging: prolonged shipping disruptions in the Strait of Hormuz, damage to Shell's Pearl gas-to-liquids facility in Qatar from missile attacks involving Iran, and several producers in Bahrain and the UAE declaring force majeure and suspending supplies. South Korea, a major global base oil producer and key exporter of Group III base oils, has recently implemented mandatory export caps on refined petroleum products to secure domestic supply in response to the crisis. Twining said, "This historic price increase will inevitably be borne by downstream users. Costs will be passed through the chain to finished lubricants and ultimately to consumers." She added, "If no new supplies arrive, inventories will be depleted within a month, directly suppressing the output of finished lubricants. Vehicle owners might postpone oil changes, but they will face not only significantly higher prices but also increasing difficulty in obtaining the products." Rico Luman, Senior Sector Economist for Transportation and Logistics at ING, stated that the current tightness in the crude oil market, combined with the high share of Asian and Middle Eastern regions in base oil supply, is certain to trigger a supply crunch. He noted via email that while some buffer stocks exist further down the supply chain, delivery times will inevitably lengthen and restocking will become difficult. Coupled with overall rising oil prices and high dependence on Asian supply, prices will face further upward pressure. Discussions were pragmatic and the situation is severe. The Independent Lubricant Manufacturers Association (ILMA) recently held talks with US lawmakers regarding base oil supply disruptions, describing the meeting as practical and sobering. All parties acknowledged the severity of the situation and the lack of a clear short-term solution. The association pointed out that approximately 44% of the US's regular base oil supply comes from the Persian Gulf. On April 8, it issued a warning that market impacts are already visible and supply disruptions are spreading to multiple industries. ILMA, which represents independent lubricant manufacturers, anticipates that the US base oil market will remain under pressure until at least 2027, and companies across the entire supply chain must prepare for soaring costs. ILMA CEO Holly Alfano stated that the lubricants industry is facing a triple squeeze:

Nearly 40% of global Group III base oil capacity in the Persian Gulf is offline or unable to be shipped for export; South Korean refiners face production constraints due to crude shortages; Refineries are shifting Group II base oil feedstocks towards fuel production.

She told CNBC, "The convergence of these factors means nearly 75% of US Group III base oil imports face supply pressure, and the industry cannot substitute with Group II base oils to fill the gap." She further added that with the hurricane season approaching, any storm impacting the US Gulf Coast could potentially shut down 30-40% of US Group II base oil production and a further 10% of Group III production, significantly worsening the already strained supply chain.