Due in large part to the effects of the COVID-19 pandemic, the global supply of crude oil remains tight. This could affect white mineral oil buyers as demand rises back to pre-pandemic levels for base oils and all related products.
At the time of writing, it seems unlikely that the U.S. Department of Energy will release its Strategic Petroleum Reserves (SPR), meaning that oil supply will remain tight for the foreseeable future.
More than ever, maintaining a steady supply will remain a top priority for food-grade, white mineral oil buyers going forward. Thankfully, there are steps you can take to improve your oil supply security.
- Improve your supply chain visibility.
- Automate your supply chain.
- Regularly optimize your supply chain.
The huge increases in shipping cost and time have many companies scrambling for alternatives. As you read about supply chain optimization below, you’ll also learn why Renkert’s USA-produced white mineral oils—with advantages over many foreign-sourced, vegetable-based products (palm, coconut and other oils)—is a great option.
Why Worldwide Oil Markets are Tight
The COVID-19 virus has affected the global economy in unforeseen ways. As the economy declined, oil markets were also inevitably weakened as well.
Demand Side
As the pandemic forced people to remain at home and spend less money, global production and mobility slowed, crippling worldwide demand for oil.
The International Energy Agency (IEA) reported that oil demand was down 30 percent from the year before, reaching lows not seen since 1995. This reduced demand for fuels (the major product from oil refining) caused reduced production of specialty, highly refined white mineral oils, which are co-products.
As the pandemic has eased, the economy has started to revive. The result is that as of the fourth quarter of 2021, demand is once again high. World supply struggles to keep up, causing significant challenges for suppliers and product manufacturers.
Supply Side
While there are normally measures in place to coordinate the oil-producing countries in such crises, these measures were not successfully implemented at the start of the pandemic.
In 2020, members of the OPEC+ alliance (which includes the OPEC countries as well as other major oil-producing nations) did not come to an agreement about cutting oil production. Russia and Saudi Arabia responded by flooding the market.
Eventually, an agreement was reached to limit oil production in order to help stabilize the market. This agreement represented the biggest cut in production in the history of the organization.
The resulting severe tightening in oil supply and refining continues to have downstream effects for oil-based and oil-dependent products, including white mineral oils.
Working with a supplier like Renkert Oil mitigates supply insecurity considerably. We are experts at maximizing supply chain security so that your business is able to withstand such significant market fluctuations.
The Importance of Supply Chain Optimization
For product manufacturers, keeping a steady supply of raw materials is crucial to maintaining a consistent production operation.
Nevertheless, supply chains are often affected by issues outside of a manufacturer’s control. The recent tightening of white mineral oil supply due to the COVID-19 pandemic is a perfect example of the unforeseen difficulties that can arise for product producers.
The solution is to prioritize supply chain optimization to improve supply stability and ensure maximal security for your consumer base.
There are a number of ways to go about protecting your supply chain. Here are a few of the most important.
1. Improve Your Supply Chain Visibility
The first step to making sure your supply chain is robust enough to withstand a variety of market conditions is to gather and analyze as much information about it as possible. What you want is a sort of “bird’s eye view” of how products flow into and out of your operation.
An inventory management software program is one way to increase visibility because it tracks inventory in real-time. It will help you track inventory as it moves from location to location and through the steps of your production process. This allows you to avoid stockouts, backorders, and overpaying on carrying costs.
You also want to increase visibility on the parts of your supply chain that expand beyond your operation. This includes partners both downstream and upstream, customers and suppliers, to maintain an accurate picture of your production. The undersupply of trucking is an obvious example of how delays can be anticipated through this review.
2. Automate Your Supply Chain
While human guidance neither can nor should ever be fully eliminated from supply chain management, efficiency can be greatly improved by using automation.
This can be beneficial for a number of reasons including:
- Eliminating human error
- Saving time
- Saving money
- Improving efficiency
While buying hardware to automate the warehouse is sometimes prohibitively expensive, automating order processing and shipping are much more manageable techniques that can be integrated into your supply chain process.
3. Regularly Optimize Your Supply Chain
Businesses in a competitive and fast-moving market cannot afford to optimize their supply chain once and expect it to function without hiccups indefinitely.
As market conditions change, and relations with suppliers and customers are modified, your supply chain management should be updated as well.
This means regularly examining your inventory management, lead times and keeping up with changes in production schemes so that your process remains as optimized as possible.
Protect Your White Mineral Oil Supply Security With Renkert
No manufacturer can control every aspect of the supply chain, or foresee catastrophic and disruptive events like international pandemics or economic crises. But a partner like us, with decades of experience helping customers through these events, can help you prepare for them.
The current shortage in the crude oil supply is a perfect example of how high-level economic phenomena can have a ripple effect on product manufacturers for whom white mineral oil is a crucial part of production. Let Renkert Oil help. We are industry leaders in:
- Support: A wide ranging network of support is important for improving supply chain efficiency and producing products that reliably meet customer standards. Our close relationships with Chevron, Neste and Shell gives us a refining network that spans the globe.
- Inventory: We make a significant investment in inventory to be a reliable white mineral oil supplier, optimized based on your demand and the number of days you want to carry inventory. This allows us to consistently supply our contract customers even when natural or geopolitical events threaten regional supply.
- Logistics: Renkert takes a consultative approach. We offer you our expertise in a vast range of products and solutions for getting you just what you need, exactly when and where you need it. We alert our customers of the changing capabilities and expectations for rail and truck delivery.
With locations spanning the United States and Europe, and as the third largest white mineral oil producer in North America, we are your best choice for a dependable supplier of base oils, white mineral oils, isoparaffins, and other specialty oil products.
Talk to Renkert today about making us your primary white mineral oil supplier.