The Impact of the Crisis in Ukraine on Businesses and How to Prepare

We are deeply troubled by the conflict between Russia and Ukraine and the ominous implications it has for escalating tensions between Russia and Western nations. As we watch the war and humanitarian crisis in Ukraine unfold in Europe, we join the free world in condemning violence and praying for peace and security. The situation is creating a ripple effect globally with turmoil in global financial markets including oil well over $100/barrel for the first time since 2014. While seemingly trivial when compared to the suffering within Ukraine as lives are lost and refugees flood into Europe, it is nonetheless advisable to plan for a wide range of contingencies including heightened prices for carbon-based products. As the conflict began, suppliers already announced price increases of up to 15%. We expect more increases in the near future. Russia is a major supplier to the world of natural resources including oil, natural gas and other important raw materials the world relies on. This is having dramatic effects, some of which we have already seen at the gas pump. The manufacturing of Diesel Exhaust Fluid and other products will be impacted. While we cannot predict what will happen in the coming days, weeks or months, it appears that many businesses in the United States will be directly or indirectly impacted–some significantly so.  For your benefit we will outline what products and services we think will be the most disrupted and offer some solutions for your business. To be clear, we highly recommend planning and being proactive where any product could either see a rise in prices or be in short supply.

Things to Consider: First, Look at the The Overall Big Picture

Shopping around right now might be a fruitless exercise. All suppliers are dealing with the same issue with some reportedly running out of key products such as DEF.  Supplier price increases are universal and supply is shrinking and demand is still there. The micro economics are in place, in the macro economic situation is volatile and restricted with no end in sight. The goal should be to save operational money, not just to shop for a near term deal.

• We caution against switching suppliers so you can be at the front of the line and not the back of the line where you will find yourself off the allocation list. This is already happening in the DEF market where products are becoming unavailable, and distributors will allocate to current customers first. Current SCL Customers get first allocation and our size and supplier relationships favor our ability to procure products. 
• Rather than try to save on a specific product, look at your overall operating costs for how you may save money over the course of 2022 and beyond.  For example, rather than try to save $100 now, think about how you can save $1,000 over the next few months and $10,000 over the course of the next two years.
• Extend drain intervals using premium and synthetic products. This is no longer a tired cliche but a necessity. It will save on labor, less overall changes overall, downtime in the shop, and protects and extends engine life reducing the chances of more costly engine breakdowns which will dwarf your concerns about rising product prices.
• Talk about product options with your SCL Specialist. For example, switching to Chevron DELO AEF saves on Diesel Particulate Filter costs. 

Diesel Exhaust Fluid Rising Prices and Shortages

DEF prices continued an upward trend into 2022 with another price increase in January.  Europe will face a natural gas shortage as both sides seek to inflict economic pain, and many natural gas pipelines run through Ukraine to Europe. Natural gas is a source of hydrogen when making ammonia. The ammonia is made into urea with the leftover carbon. DEF is made from 32.5% urea. Fertilizer has similar inputs and those prices have skyrocketed. What We Are Doing Through our long term relationships with suppliers we are acquiring DEF and negotiating the best prices possible for our customers. Keeping current DEF customers on the allocation priority list. What You Can Do

• Anticipate the price of DEF will increase. The natural gas supply disruption is going to be a long term reality regardless of the length or severity of the war.
• DO NOT compromise on DEF quality in an attempt to save money. The result can be devastating to engines.
• Prepare for a possible scenario where the manufacturing and supply chain is disrupted, where there may be instances where the product is in short supply, particularly at retail.
• We recommend having at least a three week stock of DEF, safely secured.
• Take advantage of purchasing DEF at the Pump. We outline the math for you here and the savings can be up to 50%.

Helpful Reading: Bulk and DEF at the Pump Options Proper DEF Storage DEF Quality Control Factors that Impact DEF Pricing Prea Urea Versus Liquid

Combatting and Rethinking Lubricant Price Increases

On March 7, increases for Philipps 66, Shell and Shell antifreezes, Olympus, Mobil, Valvoline and Lucas will occur. On March 28, increases for Chevron (15% + freight), and Castrol (20%) will go into effect. The price of crude oil has surged 20% since this news was first announced.  We expect additional increases throughout at least the first half of 2022. What We Are Doing Working with customers to reduce fuel costs by evaluating their fleet and switching lubricants where capable. What You Can Do

• Think twice before considering cheap lubricant options. Minor savings now can be catastrophic later.
• Search our OverStock Inventory for deals
• Consider Premium Lubricants to achieve meaningful savings

Helpful Reading: Example of a Company That Saved with Premium Lubricants Why Less Expensive Lubricants Won’t Save You Money How Lubricant Prices Are Determined SCL Overstock Inventory Overview Chevron Product Promises Fuel Savings in Class 6, 8 Trucks

Rising Fuel and Gas Prices

Diesel has topped $6/gallon in most places in California. While the OPEC production cuts that expire in April 2022 may provide some relief, this could be offset by the overall disruptions including the likelihood that western nations will refuse to purchase Russian oil which represents about 10% of global oil production. We see continued pain at the pump through most of 2022 with the high chance it could get worse before it gets better. What We Are Doing Working with customers to reduce fuel costs by evaluating their fleet and switching lubricants where possible. What You Can Do

• If you have delayed a custom fleet evaluation by our team of specialists, you simply cannot wait any longer.  
• Utilize our fuel cost savings calculator to gain an understanding of how even incremental changes can lead to significant fuel cost savings now, and years to come.
• Enroll in a Cardlock Fuel Program. They are not Credit Cards and provide many more layers of security and tracking, plus limitations on how much fuel can be purchased so drivers cannot fill up their personal vehicles. They also provide important data for fleet fuel management. This data can be leveraged to save a lot of money when gas is exceeding $6/gallon.
• Implement a Driver Fuel Policy. The perceived reward for filling up a personal tank with gas is higher when gas approaches $6/gallon, it is tempting. When gas prices rise you must protect your business from any attempt towards fraud or theft from employees.
• Ensure that no past employees still have access to your Cardlock cards or other means of procuring fuel.

Helpful Reading: Examples of Fuel Cost Savings Calculator Cardlock Versus Credit Cards Overview of Oil Automotive Service Departments and Customers  With rising fuel costs and a shortage in new cars, plus historically high prices for used cars, this is a once-in-a-generation opportunity for shops to strengthen the relationship they have with customers. With inflation hurting wallets, and food costs likely to rise, taking an honest and empathetic approach regarding how additional costs now can prevent significant costs down the road is serving your customers' best interests and you will be rewarded with loyalty. What We Are Doing Your SCL team has point-of-sales materials that your customer service and business development departments can utilize. What You Can Do

• Offer all customers a free tire pressure check. Many do not know that low tire pressure will lead to poor fuel economy. 
• While seemingly counterintuitive right now, speak to them about the value of premium fuel so that the new car or car with 200,000 miles can avoid thousands of dollars in engine costs.  
• A clean engine  leads to better performance, lower emissions and maximum fuel economy. Explain how full synthetic products such as Techron fuel additive can remove deposits from old and new cars protecting the engine but also impeding the flow of fuel through the fuel injector.
• Combat labor shortages and rising labor costs with automotive service department efficiency.

Helpful Reading: How to Explain Premium Products to Customers How to Run Your Automotive Service Department Efficiently