The Iran war has done the obvious damage to crude oil. The less obvious damage is showing up under the hoods of supercars in London, Monte Carlo, and Los Angeles. A niche product called base oil is in short supply.
Stocks could be empty in about a month, per Argus Media. That would hit luxury car owners first.
Base oil is the raw stuff that goes into engine lubricants. The high-grade types are known as Group III and Group IV. They include a sub-type called PAO. Supercars need them to handle high heat, high RPMs, and intense pressure.
The Gulf region makes as much as 20% of the world's Group III base oil. Last year it shipped 72% of Europe's Group III imports and 47% of the U.S. share. The numbers come from Argus Media, which tracks pricing across the trade.
The supply has been hit in three ways at once. Shipping through the Strait of Hormuz has slowed. Shell's Pearl Gas-To-Liquid plant in Qatar took damage from Iranian missile strikes. Producers in Bahrain and the U.A.E. have called "force majeure," which excuses them from delivery contracts.
Group III base oil prices in northern Europe have climbed nearly 100% since the war started, per Argus. That puts pricing at record highs.
"Stocks are going to run dry in a month if nothing comes in and that will just cut finished lubricant production," Gabriella Twining, head of base oils pricing at Argus Media, told CNBC. "You can push back an oil change but it's just going to be more expensive and there will be less availability."
South Korea, one of the world's biggest Group III base oil exporters, just put export caps on refined fuel. The move was meant to protect its own supply. It also removes another source of relief for buyers in Europe and the U.S.
The Independent Lubricant Manufacturers Association sees pressure on the U.S. base oil market through at least 2027. The group met with U.S. lawmakers to walk through the supply picture. ILMA CEO Holly Alfano told CNBC that nearly three-quarters of U.S. Group III imports are now under stress, with no easy swap-in product.
There is a hurricane risk on top of all this. A single storm hitting the Gulf Coast this season could knock out 30% to 40% of U.S. Group II base oil capacity and another 10% of Group III, per ILMA. That makes a tight market even tighter.
The read-through goes well past Ferrari. Lubricants are in factory machines, planes, ships, and trucks. The same cost push showing up in supercar service will end up in shipping rates and factory output.
If anything moves, it needs base oil. The world is running short on it.
ILMA flagged that roughly 40% of global Group III supply from the Persian Gulf is offline or unable to ship. South Korean refiners are constrained by a crude shortage. Refiners are also diverting Group II feedstock to fuels, which removes the obvious backup option.
