With consistently high margins overall, lubricating oils have traditionally been one of the most attractive areas in the oil and gas value chain. However, looking ahead, we could see disruption as electrification takes hold in the transport sector. To assess what may be on the horizon, we conducted an in-depth market study and developed granular projections out to 2035. The main finding was that, while volume growth may be flattening, there is still room for value-pool expansion. This will, however, be highly variable by region, market segment, and product type, so where to play matters. This growth is also subject to some significant risks, so investors will need to keep a close eye on developments in areas such as technology and policy.
The study confirmed our expectation that lubes volume growth would continue but at a slightly slower rate over coming years, with road-transport demand (currently 40 percent of the total) likely to peak within the next five years (Exhibit 1). From then on, transport demand will decline slowly as the share of electric vehicles (EVs), car sharing, and hailing increases and as we see longer change intervals for remaining internal-combustion-engine (ICE) vehicles.
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SOURCE: McKinsey & Company
