When I look at world events that are daily changing the way we get the supplies of parts, raw materials, and base oils, I’m immediately reminded of what we went through in the 1970s when the Middle East shut down the flow of oil during the Israel/Egypt 7-day war that set the stage for what is happening now. As crazy and memorable (not in a good way) as those times were, we are now entering a period of uncertainty that will have a major impact on cost and global lubricant availability for the next decade.
Fifty years ago, the supply of Group II base oils and suitable additive products was dominated by domestic sources, and the formulation of our automotive lubricants, such as engine oil and transmission fluid, didn’t require the complicated, sophisticated technology that current lubricants demand. Supply shortages at that time were mainly felt by the consumers buying gasoline. Lubricating needs were easily met because service fluids went up in price, but base oil and additive raw materials availability wasn’t the challenge; gasoline was. The service and repair industry took a hit because people weren’t driving as much, reducing demand for repairs.
Fast forward 50 years, and the whole situation has changed, with all aspects of automotive lubricant base oils and additives affected by the current war in the Middle East. The Persian Gulf is currently home to refineries that supply approximately 20% of global Group III base oil production capacity. Most vehicles coming off OEM assembly lines over the last 10 years have been recommended to use synthetic lubricants because OEMs now require high-quality, low-viscosity oils designed for extended service intervals for engines and transmissions. For automatic transmissions, this started around 2005 with DEXRON VI (along with dozens of other OEMs) and has evolved into the ULV (ultra-low viscosity) ATFs we now see.
To achieve super-low viscosities that enable long service life, you need synthetic base oils or refined hydrocracked (more recently, catalytic wax conversion) mineral base oils that perform like synthetic base oils. This has driven market demand for base oils that meet these requirements, like Group III or GTL base oils produced in the Persian Gulf refineries. This has forced suppliers of lubricants across the automotive lubricant value chain to evaluate all elements of their businesses to maintain profitability while continuing to comply with the evolving technical requirements of OEM specifications.
Since 1999, automotive fluids have used the term “synthetic” to market premium base oil products, with no formal, uniformly enforced definition of what constitutes a “synthetic” base oil. Prior to 1999, “the term “synthetic’ was defined as lubricants formulated from chemically engineered base stocks like polyalphaolefins, esters, and other synthesized components. That changed after the famous case that came before the Better Business Bureau’s National Advertising Division, which concluded the new highly refined Group III base oils derived from crude oil sources could be marketed as “synthetic” based on performance characteristics. Overnight, it evolved from a classification based on chemically engineered base oils into a word used by the public to describe a class of lubricants.
Because there is no formal definition, the industry has defined “synthetic” as Group III or better base oils that meet or exceed requirements. The amount of sulfur in the oil (must be less than 0.03%). The molecule must have greater than 90% saturates (meaning fewer double-bond molecules for better homogeneity). It must have a VI (viscosity index) greater than 120 (meaning the viscosity of the base oil stays similar regardless of how cold or hot it gets; PAO (Group IV) is the most stable of the base oils for low-temperature applications.
Over the last 25 years, Group III base oils have become the dominant base oils for the lower-cost, “full synthetic” transmission fluids now dominating the aftermarket. What this is leading up to is the potential for severe limits on supplies of Group III base oils sourced from Middle Eastern refineries in the Persian Gulf. In the first part of 2026, these Middle Eastern refineries supplied more than half of the Group III base oils entering the country. Because the conflict has resulted in damage to three major refineries that produce Group III and GTL base oils, production disruptions have sharply curtailed availability and driven up the cost of these base oils.
The engine oil blenders (ILMA) have petitioned the API to implement Emergency Provisional Licensing, hoping to give blenders flexibility in sourcing Group III base oils, but it does not allow the substitution of Group II or II+ base oils for engine oil formulations based on Group III blends.
The blenders of ATF have a much more unregulated market to contend with. The OEMs will still have their “certified” licensed transmission fluids, but the rest of the transmission fluid aftermarket has no governing bodies or regulatory agency rules to comply with. As Group III prices rise and availability declines, the cost differential between premium synthetic blends and lower-tier products using cheaper base oils becomes a significant competitive advantage for companies that interpret the BBB definition of synthetic for marketing purposes.
Because all base stocks are not created equal, be they constructed “synthetic” molecules or mineral-derived, highly refined and treated molecules, differences in technical requirements, the size, type and location of the plant producing them, not to mention the supply chain that provides the raw materials or crude oil used to produce them, contribute to a highly volatile marketplace for lubricants formulators and blenders. Base oils are the starting point for the high-performance lubricants the automotive service industry in this country now demands for low-viscosity, extended oil drain intervals that are common in today’s aftermarket. Without these base oils, the LV and ULV fluids with “fill for life” claims would not be possible.
Today, we have many Group III and III+ base oils from around the world to choose from (if you can get them). The one thing Group III and III+ base oils have in common is that sulfur levels are below 300 ppm, with some close to zero. The next thing they have in common is saturation. In base oil, saturates refer to hydrocarbon molecules that are completely bonded with hydrogen atoms, meaning they lack reactive carbon-carbon double bonds. A higher saturate level creates stronger molecular bonds, making the oil far more resistant to thermal breakdown, oxidation, and viscosity loss.
Saturate levels in Group III and III+ base oils usually are close to 98% or more, but consistency among Group III and III+ base oils tends to go away with VI (viscosity index), which is an arbitrary, unitless measure that describes how a fluid’s viscosity changes with temperature; all automotive lubricant fluids thin (lose viscosity) as they heat up.
The VI measures how much fluid thins out over a specific temperature range. Some Group III base oils have VIs that can start as low as 120. The base oil VI’s effect on the formulation can have a positive influence on performance and formulation flexibility as the VI goes up, with the highest exceeding 135; the higher the better, with 130 and higher being called Group III+. For a better understanding of the differences between the base oil Groups, it is necessary to mention the properties of Group IV and V base oils.
Group IV polyalphaolefins (PAO) do not contain ring structures, double bonds, sulfur, nitrogen components, or waxy hydrocarbons. They have superior low-temperature flow properties, and they allow blenders and formulators to develop high-performance lubricants where extreme temperatures are normal, or extended duty cycles are needed.
Group V is an “everything else” category for base oils and includes ester-derived base oils and additives (“rerefined” base oils and can be considered Group V base oils even though they are marketed as Group II or III base oils).
Production capacity for Group II base oils in North America has grown, but it must also be noted that there can be formulation differences between them that make them unable to meet the performance requirements of the toughest LV and ULV specifications now used by most OEMs. The VI of the base oil plays a significant role in enabling an ATF formulator to meet the requirements for low viscosity and low volatility that these higher-performance fluid specifications demand. Group II or II+ and Group III base oils with a VI of less than 120 should not be used, but they have greater availability in North America.
Group III and III+ are normally available from global markets, with limited supply from Europe and North America, where demand is highest, and the global supply chain is the longest. We are now starting to see the negative impact of having the supply of Group III and III+ concentrated in one hard-to-access region of the world, with the potential to lose that supply for an extended period. Oil companies, additive manufacturers and lubricant blenders still need to produce the lubricants necessary to keep the fleet running. The question is, which base oil compromises will be made to provide customers with affordable choices that meet all performance requirements.
The result of this market shift is that oil companies, marketers, and customers will have choices to make about what they do, say, and purchase. Do you pay a premium for OEM-certified ATF, or do you have a brand you trust, or does private label offer more value? Do you need the products with the market hype like “synthetic” or high-mileage offering the potential for additional protection or extended service intervals? Or do you just want the most cost-effective solution that offers good value with protection that meets minimum standards? Will using an official OEM-licensed ATF formulated with premium base oils at a premium price be worth it to the end user when in warranty, beyond warranty, or when a third-party warranty tied to exclusive OEM fluid use is a factor?
In the end, we want to use what the owner’s manual tells us to use, with the correct viscosity grade and knowledge about who made and supplied the ATF. We have many choices and decisions to make as consumers, but we rely on the lubricant industry to supply products that meet or exceed OEM requirements for the type of transmission you are dealing with.
Choices about which base oils to use when formulating premium ATF vary depending on OEM approvals, unique viscosity grades, or high-performance applications. These types of ATF are very performance-driven, with OEM-licensed ATFs copyrighted and marketed based on claims of proven performance and consistency, with warranty backup guaranteed if the approved product is used. This does not allow the use of base oils of lesser quality.
Most additive suppliers, oil companies, and lubricant blenders will do what is necessary to maintain demand for their highest volume conventional products. This usually means products formulated for “value” that meet minimum standards but offer much lower cost if that is what motivates the end user. Lubricant blenders, large and small, are now using a wide range of additives and base oils to make sure there is a wide range of available ATFs to service all types of modern and older automatic transmissions.
The war in the Middle East has forced suppliers and end users at every stage of the supply chain to analyze all aspects of their business and inventory to maintain profitability while still meeting the requirements of all existing, new, and evolving lubricant specifications. Because ATF is what I would consider an “unregulated” marketplace, it’s up to the service provider to ensure the right product is used. Instead of getting easier, it seems to be getting worse, with more confusion and bad advice than ever before.
