US President Donald Trump did the vehicle electrification movement a solid when he decided to start dropping bombs on Iran. The resulting war sparked a new wave of interest in EVs among prospective car buyers, while disrupting global shipping lanes and jacking up the price of gasoline and diesel fuel. Now the rising cost of motor oil is coming in for its share of attention, with the popular Costco wholesale buying club going the extra step of rationing.
EV Drivers Greet Motor Oil News With Big Yawn
The inflationary impact of Trump’s war in Iran eventually affects everyone regardless of whether or not they own any kind of car. However, people who drive 100% EVs are spared from the direct impact on the cost of gasoline or diesel, and on motor oil, too. Though plug-in hybrids and EREVs (extended-range EVs) require oil changes, fully electrified vehicles do not.
The impact of the Iran war on fuel prices has received widespread media attention. The impact on motor oil has been covered to a lesser extent, but in May the Las Vegas, Nevada ABC affiliate KTNV began taking note of a looming motor oil shortage affecting both Walmart and Costco.
In June, National Public Radio summarized the state of play, and it’s not pretty:
“Since the start of the war, the price of the base oil used to blend widely-used synthetic motor oil has ‘more than tripled to record levels,’ Amanda Hay, an analyst with the market insight firm Independent Commodity Intelligence Services, told NPR via email.”
“While the U.S. is a net exporter of gasoline, diesel and jet fuel — producing more than we use — the country is a net importer of base oil,” NPR further noted.
“The oil used in synthetic motor oil, in particular, is not produced in the U.S. in large quantities,” NPR added for good measure.
Another Reason To Love EVs
The motor oil issue received a renewed burst of attention this week when news began dripping out that the Costco wholesale buying club has pumped up the cost of its Kirkland Signature full-synthetic motor oil to $58.00 per 10-quart pack, while also imposing a limit of one transaction at a time, with a further limit of two transactions per week.
To be clear, the price increases have rippled out far beyond Costco. Attention has focused on Costco, though, as sort of flashing red light. The company has earned a reputation for keeping its prices low, meaning a price spike of this sort — accompanied by rationing, no less — indicates that a much deeper, broader situation is percolating among motor oil producers.
The auto industry news organization The Auto Wire is among those emphasizing that this is not normal practice for Costco. The company’s Kirkland Signature motor oil, notes Auto Wire reporter Shawn Henry, has typically hovered around the middle-$30’s before soaring to $58.00.
“Base oil, the feedstock lubricant blenders turn into finished motor oil, comes out of the same barrel of crude as gasoline and diesel,” Henry elaborates. “When refiners can earn more money finishing a barrel into fuel than into lubricant stock, base oil supply tightens and its cost follows crude and crack-spread swings all the way up the chain, eventually arriving at a jug on a Costco shelf.”
Moving The Needle From EV-Curious To EV Owner
The unforced wars launched by Trump and Russian President Vladimir Putin are not the only factors pushing up the cost of gas, diesel, and motor oil. In the case of motor oil, costs began rising years before two extraordinarily powerful old men decided to work out their paranoid fantasies on the world stage. The price increases are connected to the increased sophistication of modern internal combustion engines, which require more sophisticated — and expensive — lubricants.
Of course, motor oil is not a weekly or even a monthly expense for gasmobile owners. Still, the motor oil price spike is yet another straw in the camel’s back of the TCO (total cost of ownership) for vehicles powered by internal combustion engines.
The worst is yet to come. Even as Costco drew a fresh burst of attention to the rising cost of motor oil, another disastrous knock-on effect of Trump’s war in Iran occurred last week, when the Iran-backed Houthi rebel group in Yemen launched yet another attack on Saudi Arabia. The Houthis captured an island on the Bab el-Mandeb Strait, which shippers have been using as an alternative route after Iran effectively closed the Strait of Hormuz.
While regional officials are attempting to calm frayed nerves over the security of ships passing through the Bab el-Mandeb Strait, last week another sign of trouble surfaced when Saudi Arabia shut down an alternative pipeline transportation route after it was attacked by drones originating from Iraq.
What else could possibly go wrong? Who knows, but as of this writing the likelihood is that the TCO for conventional vehicles has nowhere to go but up.
All else being equal, that makes the TCO for EVs even more attractive than it is now. Despite the higher up-front cost of EVs, they are less expensive to maintain and operate than their gas-powered counterparts, which evens up the score over time.
As for the impact on EV sales in the US, that remains to be seen. Industry analysts noted an uptick in online searches for electric cars soon after February 28, when Trump began dropping his bombs on Iran. Analysts have also cautioned that fuel price spikes don’t necessarily lead to a significant surge in EV sales, but some have suggested that improvements in the nation’s public EV charging network will help tip the balance.
In that regard, keep an eye on Costco’s auto program. The company does not sell cars directly, but has established itself as a significant driver of auto sales through its member incentive program, which includes selected electric vehicles.
As Costco notes, its incentives can be stacked on top of manufacturer incentives. While the federal tax credit for EVs is kaput, members can also investigate the potential for stacking their Costco and incentive on any state and local programs that are still operative (here’s one example).
As of this writing, Costco is offering its members a temporary incentive (expires on November 2) on three 100% battery-powered Volvo EVs, the EX90, EX40, and EX 30. Depending on the model and the membership level, the incentives range from $1,000 to $2,000.
Photo: The cost-cutting firm Costco has been forced to raise prices and implement rationing, as US President Donald Trump’s war in Iran continues to push up the cost of fuel and motor oil, too (cropped, courtesy of Costco).
