Base Oil Market Expected to Reach $37.5 Billion by 2033

According to a new report published by Allied Market Research, titled, “Base Oil Market," The base oil market was valued at $22.1 billion in 2023, and is estimated to reach $37.5 billion by 2033, growing at a CAGR of 5.5% from 2024 to 2033.

Introduction

Base oil is a refined petroleum product that serves as the foundation or the primary component for lubricating oils. It is produced through the refining of crude oil or synthetically created via chemical processes. The primary function of base oil is to reduce friction and wear, and to provide cooling and cleaning properties in machines or engines. Base oils are typically classified into five categories based on their refining processes and the presence of additives. These categories include Group I (solvent-refined oils), Group II (hydrotreated oils), Group III (hydrocracked oils), Group IV (synthetic oils such as polyalphaolefins), and Group V (oils that do not fall into the previous categories, including ester-based oils). These groups differ in their viscosity, oxidation stability, and purity, among other factors.

Market Dynamics

Increasing demand for lubricants is expected to drive the growth of the base oil market. The demand for base oils is primarily driven by the increasing use of lubricants across various sectors, including automotive, industrial, and consumer applications. Lubricants play a vital role in reducing friction, minimizing wear and tear, and ensuring smooth operation of machinery and vehicles. As industries evolve and technologies improve, the need for high-performance lubricants has become even more critical, particularly in the automotive sector. In October 2023, Hindustan Petroleum Corporation Limited (HPCL) and Chevron Brands International LLC, a subsidiary of Chevron Corporation, signed a long-term agreement. This partnership covers the licensing, production, distribution, and marketing of Chevron's lubricant products under the Caltex brand in India, including Chevron's renowned Havoline and Delo branded lubricants.

The automotive industry, in particular, has seen significant growth, with advancements in vehicle technology creating a strong demand for specialized lubricants. Modern vehicles, especially those with high-performance engines, require lubricants that can withstand higher temperatures, offer better fuel efficiency, and provide enhanced protection against engine wear. This shift toward more advanced vehicles, such as electric and hybrid models, as well as those with turbocharged engines, has further intensified the need for premium-quality base oils to create high-performance lubricants that meet stringent specifications.

However, competition from recycled oils is expected to hamper the growth of base oil market. The rise of recycled base oils presents a significant challenge to traditional base oil production, especially in developed regions where environmental concerns and cost-efficiency are paramount. Recycled base oils are derived from used oils that have undergone a cleaning and refining process, making them an attractive alternative to virgin oils. This process not only reduces the need for new raw materials, such as crude oil, but also helps minimize the environmental impact associated with the production of base oils. As consumers and industries become more environmentally conscious, there has been a growing preference for recycled oils due to their eco-friendly nature and lower carbon footprint.

In addition to their environmental benefits, recycled base oils are also cost-effective. The production costs for recycled oils are generally lower than that of virgin oils, which can be subject to fluctuations in crude oil prices. For businesses looking to cut operational costs while adhering to sustainability goals, recycled base oils offer a viable solution. As a result, many companies are increasingly adopting recycled oils in their operations, especially in sectors where cost control is a significant factor, such as automotive and industrial machinery.

Segments Overview

The base oil market is segmented on the basis of resin type, application, and region. Depending on type, the market is categorized into group I, II, III, IV, and V. According to application, it is classified into automotive oil, industrial oil, metalworking fluids, hydraulic oil, greases, and others. Region wise, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

By type, Group II segment is anticipated to grow at the fastest CAGR of 6.1% during the forecast period. In the automotive industry, Group II base oils are commonly used in the production of high-quality motor oils, where their improved stability and resistance to breakdown at high temperatures ensure better engine protection. They help in maintaining clean engine parts by reducing sludge and deposits, contributing to enhanced fuel efficiency and engine longevity. Additionally, Group II base oils are used in various industrial lubricants, including hydraulic fluids, gear oils, and compressor oils. These oils are favored for their ability to perform consistently over a wide range of temperatures, providing necessary protection for machinery operating in demanding conditions.

On the basis of application, industrial oil is the fastest growing segment in the base oil market growing with the CAGR of 6.3% during the forecast period. In industrial oil formulations, base oils are blended with additives to improve characteristics such as corrosion resistance, oxidative stability, and wear protection. For instance, in hydraulic oils, the base oil provides essential lubrication to machinery components, reducing friction and minimizing wear. In gear oils, the base oil ensures the smooth operation of gears, preventing metal-to-metal contact and extending the life of the equipment The shift from synthetic oils to industrial bio-oils gained momentum, with bio-oils extracted from natural sources such as soybean, linseed, and castor beans offering comparable or superior performance. These bio-oils provide benefits like high viscosity index, excellent biodegradability, and non-toxicity. The adoption of industrial bio-oils is expected to grow at a CAGR of 3–4% for soybean oil and 4–5% for other bio-oils over the next 2–3 years.

Regional Analysis

By region, the Asia-Pacific region showed the fastest CAGR of 5.9% growth during the forecast period. In the first half of the 2024-25 fiscal year, India's base oil imports rose by 33% year-over-year, totaling 1.54 million tons. This increase is attributed to decreased domestic production due to plant issues and maintenance, despite a slowdown in India's economic growth. South Korea emerged as the top supplier, with imports reaching 115,487 tons in September 2024, an 81% increase from the previous year. China's rapid adoption of electric vehicles (EVs) is reshaping its oil demand landscape. The country is projected to experience a slowdown in oil demand growth, with crude oil imports expected to peak as early as 2025. This shift is attributed to the increasing dominance of EVs and hybrid cars, reducing the need for imported crude oil for gasoline refining

Competitive Analysis

Key players operating in the base oil market include Phillips 66 Company, Chevron Corporation, Exxon Mobil Corporation, Evonik Industries AG, Neste Oyj, PT Pertamina, S-OIL Corporation, Royal Dutch Shell Plc, AVISTA OIL AG, and Saudi Aramco.

Key Market Insights

• By type, the Group I segment was the highest revenue contributor to the market accounting for one third of the of global base oil market share in 2023.
• By application, automotive oil segment dominated the base oil market in 2023, representing the CAGR of 4.8% during the forecast period.
• Region-wise, Asia-Pacific is the fastest growing region growing with a CAGR of 5.9% in the base oil market during the forecast period.