Why We No Longer Pay for Waste Oil Collections

Rodney Jones - Tuesday, March 15, 2016

 

In August 2014 following the oil price slump we were forced to change our pricing structure regarding collections of waste oil and rather than pay our customers for their oil we had to review our costs and pricing to reflect the changes.

In July 2014, oil was priced at around $105 per barrel and ever since it has been in decline. As we write this on 03/02/2016, it currently stands at $29.88 per barrel, that’s over a 70% drop since July 2014’s price point and is showing no sign of recovery.

This drop in price is due to a number of factors including reduced economic growth for many countries, political sanctions, the slump in demand for oil and the increased level of production represented most recently by Russia – one of the largest oil producers in the world – revealing they have pumped at record levels, with an output of 10.88 million barrels a day during January. Why do we not pay a rebate for your waste oil collections?

Waste management is not as comparable to the large scale production of crude oil refinement as you might think. Waste oil is legally required to go through many smaller processing methods in order to produce non-hazardous and reusable oil to remain compliant and environmentally responsible. The recycled products are then able to be re-purposed but any reusable compounds of waste oil have to compete with virgin crude oil; a purer product and are ultimately less competent so demand and its value is a lot less.

The fuel that has come from waste oil is mostly “leftovers” and it’s only market is in the lower end of the industrial fuel oil industry. It then has to compete against prices that are already much lower than other higher quality fuels; as a result companies are compelled to reduce costs to process the product and pass on these charges to the waste oil producer attributing low or negative costs. In summary we are dealing with a difficult turnaround within the industry, and it can often be a surprise when passing this information onto our new or current customers when in the past they have received money for their waste oil. We will be monitoring this situation and in turn will continue to offer our outstanding and competitive service to ensure that our customers are receiving the very best from us. 
Comments
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