Approximately 1.3 billion gallons of used lubricating oils are generated in the U.S. each year. Worldwide, this number soars to about 5.3 billion gallons. Of the amount generated in the U.S. each year, over 400 million gallons are largely not recovered and presumed to be disposed of improperly, creating significant environmental problems. Of the approximately 900 million gallons collected, only about 140 million are reprocessed.
Here lies a growing opportunity for the rebirth of the lube oil reprocessing industry. New technology and higher crude oil prices are fueling the engine that may drive move. The environment and the industry both stand to benefit. But there is a catch. New, higher standards for motor oils are coming into effect for model year 2002 automobiles. Current re-refiners don't appear to have the technology to meet the new standards with their lube base oil products, and many virgin oil refiners are electing not to spend the money to upgrade their facilities just to produce a product that only accounts for about five percent of their total yield. This could mean a supply/demand crunch for lube base oils capable of being blended up to meet the new standards.
Re-refined oil is used in making passenger car motor oils, diesel engine oils, hydraulic fluid and other lubricants. As the price of oil increases so does the attractiveness to re-refine or recycle used motor oil into new lubricant products. Canada, Great Britain, France, India, Israel, Italy, New Zealand, Pakistan, and South Africa, re-refine a larger portion of used oil into current GF-2 standard lubricating base oils than the U.S.
Dispelling a long-held myth of inferior quality, increased demand for re-refined oil has been creating new market implications for recycling used oil back into new lubricants. And, as noted, about 10 percent of the used oil that is collected is currently being re-refined to return it to its original virgin oil state.
Still, today, re-processing used oil as fuel continues to be clear favorite management option (63% of used oil total disposition). Presently, it is more profitable to market reprocessed used oil as a fuel rather than re-refine it as a lubricant. However, industry observers indicate that reprocessed lube base oils capable of meeting the new GF-3 standards, may carry a premium of 15 percent or more, compared with GF-2 base oil pricing.
The industry of re-refining
Re-refining is the most elaborate method of recycling used oil to form base stocks for lubricants. In the past 70 years, the recycling of used oil has evolved from simply removing water, insolubles and dirt, to more complicated removal of metals and volatile components via solvent extraction, distillation, hydro-treatment, and re-fractionation.
The history of used oil recycling dates back to the 1920s, when oil contained few or no additives and recycling required only "settling" (to remove water, dirt, and sludge followed by heating to further remove volatile components). This recycling process was known as reclaiming.
It used to be said that, in the old days, used oil was recycled, by filtering it through an old cowboy hat. Today "reclaimed" oil is taken a step further, and used by re-processors as refinery feedstock to make new fuel in lubricant oil. Re-refined base oils and virgin base oils are produced using similar refining technologies.
In the 1960s there were 150 companies producing 300 million gallons of re-refined oils annually. Until 1965, used oil had a significant price advantage over virgin products because of a six cent per gallon excise tax on new lubricants, which then sold for only 20 cents per gallon.
The loss of the price advantage associated with the elimination of that excise tax, combined with the increased use of additives in lubricants, labeling requirements, and the environmental hazards resulting from improper and poorly regulated reclaiming operations, resulted in numerous re-refining operations closing down. In 1988, re-refined oil comprised only two percent of all used oil generated in the US. Today, compared to the 1960s, there are significantly fewer re-refineries, and none currently capable of refining the base oils to the new GF-3 standards.
Forty years ago oil reclaiming also encountered significant setbacks due to hazardous waste produced from acid-clay processing; however, re-refining is making a comeback. Both improved quality controls and technological advancements (namely, vacuum distillation and hydro-finishing) have advanced this industry. Because of these innovations, re-refiners now transform used oil back into a quality lubricant base-stock, equal in quality to GF-2 level virgin lubricant base-stock. However, these current re-refining methods have a tendency to foul the equipment, resulting in increased downtime and costs.
For every gallon of used oil that is re-refined: approximately 50 percent are converted to re-refined base oil; 25 percent distills into light ends (fuels); 15 percent remains as bottoms (asphalt flux), and 10 percent is water. The re-refined base oil produced is sold to lubricant manufactures that compound it with additives and then package the product for the industrial and automotive market.
Some of the fuel is burned to help run the facility, while the majority of it is sold to fuel companies. The asphalt flux may be sold to roofing manufacturers, road asphalt supplier's for road building, or steel mills as a fuel. The water is treated and discharged. (Return to top)
Today, re-refiners in the U.S. process roughly 140 million gallons of used oil to produce approximately 70 million gallons of re-refined base oil annually. There are two major base oil re-refiners in the U.S. that recycle used oil into GF-2 standard lubricant base-stock:
In terms of new technology, Probex Corp. is currently getting ready to start construction on a lube oil reprocessing facility at Wellsville, Ohio with the capacity to process approximately 54 million dry gallons of used lubricating oils annually. The Wellsville site, near Pittsburgh, is located on the Ohio River and includes a barge dock, 1.4 million gallons of tankage, a rail spur and will have truck and rail loading and unloading racks. This Dallas-based energy technology company says it has a patented, proprietary lubricating base oil technology that reprocesses used lubricating oil into premium quality base oil capable of meeting the new GF-3 standards, a high-quality light distillate that is similar to diesel or home heating oil, and an asphalt modifier.
The Company expects its base lube oil to account for approximately 64 percent of the yield from its domestic reprocessing facilities, with the light distillate accounting for 24 percent and the asphalt modifier about 12 percent. Probex's used oil reprocessing technology is an extension of conventional crude oil refining techniques and equipment, employing a unique set of operating parameters together with chemical additives. The relatively straightforward technique adds a defouling stabilizer in the initial fuel pretreatment state. Probex says this virtually eliminates used lubricating oil's propensity to foul the process equipment. The Probex process generates no waste by-products and the water contained in the used oils will be treated to levels suitable for discharge into a publicly owned wastewater treatment facility. The Company plans to build five domestic and five international plants by 2006. The reprocessing facilities will be strategically located near densely populated regions to help minimize feedstock costs. Probex has acquired three collection companies to date and is continuing to expand its collection business with a goal of supplying 100 percent of the feedstock for its plants.
Independent lubricant compounders and blenders in North America, collectively, purchase approximately 670 million gallons of base oil annually, according to the Independent Lubricant Manufacturers Association. Currently, these independent formulators obtain most of their base oil feedstock from crude oil refining companies, which also manufacture for their own accounts. Because the new GF-3 standards are anticipated to reduce the supply of GF-3 quality base oils produced by both the used oil reprocessing industry and the major oil companies, independent lube oil formulators are searching for alternative suppliers of GF-3 quality base oil, not only to diversify, but also to retain a competitive market. (Return to top)
Re-refined consumer products and brand names
Several major oil companies are blending premium quality additive packages with GF-2 quality re-refined base oils and there are many smaller packagers of re-refined products (these re-refined base oils are primarily supplied by Safety Kleen and Evergreen).
Safety-Kleen, the world's largest recycler of automotive and industrial fluid waste and re-refiner of used oil, sells America's Choice, to towns, bus, railroad and taxi cab fleets, and power and light companies.
Major oil companies including ARCO, Texaco, Unocal and Chevron, have historically purchased independent GF-2 level re-refined based stock and manufacture their own brand name of re-refined oil. And some crude oil refiners are reported to be looking for sources of reprocessed base oils meeting the new GF-3 standards.
Hicks Oils, a large packager in Illinois, has a full line of GF-2 quality re-refined products under the brand name of Nature's Choice. On the West Coast, Unocal produces a line of re-refined products called Firebird Lubricants. Chevron Lubricants has introduced the ECO (Environmentally Conscious Oil) line also available in the West. Besides other brand names, many sell re-refined oil without noting their base oils were recycled. (Return to top)
Part 2, the conclusion on this series, will discuss government guidelines for purchasing re-refined lubricating oils and the purchasers of re-refined oil.
About the author: Rob Arner has worked in the field of solid waste and environmental issues both inside and outside of Washington, D.C. for the past 20 years. He can be reached at firstname.lastname@example.org. (Back)