Of course, product prices are rising day by day wherever you go worldwide. Particularly, riding a vehicle has become so costly that many of us have already reduced holding our steering. In such a situation, getting an oil (or, say, lubricant) at a competitive price is more than surprising. For instance, the gas stations sell Quaker State oil at a reduced price tag.
Then, why is Quaker State oil so cheap? Is there any mystery, or have they lowered the quality? Well, I will explain everything and positive things regarding this matter in this blog. You will definitely prefer using this oil once you finish reading this.
To reduce product cost, the mother brand “Shell” follows these ways: volume production, efficient manufacturing, and direct distribution. Again, they follow pricing strategies to sell at a reasonable price are discounts, reward programs, and value packs. Altogether, the customers are saving money to buy Quaker State oil.
How Does Oil Pricing Work?
Before digging into reasons, it would be helpful for you to understand the ways a company sets its oil price. Well, various factors influence the price. I will illustrate them in this part to give you the basic ideas.
Supply, demand, production costs, and market speculation are the main factors.
Supply and Demand
Let’s talk about supply and demand. Price may rise when the demand outstrips supply. Alternatively, it will fall if supply is above demand. Then again, economic growth increases energy demand. Market sentiment also plays a significant role (1, 2).
Production & Extraction Costs
Oil production costs can impact the oil price. For example, the cost of drilling and completing a well besides ultimate oil recovery, can significantly impact the cost of oil production (3).
Oil Quality
The quality of crude oil, with light-sweet grades, is typically priced higher than heavy-sour crudes. It can also affect market dynamics (4).
Geopolitical Events
Any geopolitical event can significantly impact oil prices by disrupting oil flow. It causes concerns about supply tightness (5). These events can lead to sharp jumps in oil prices. Furthermore, geopolitical risks can have a persistent impact on oil prices. Yet some studies suggest these impacts are often small and short-lived (6).
Government Policies and Regulations
The Biden administration has introduced several new oil and gas policies. It includes halting new oil and gas leasing on federal lands and offshore waters and suspending the Keystone pipeline, which critics argue (7, 8). Additionally, the U.S. Environmental Protection Agency’s Clean Air Act regulations have financial implications for the oil and gas industry (9).
Quaker State Oil’s Pricing Strategy – Why Is It So Cheap?
So, you have learned about the pricing factors which determine how a company sets its oil price. You may think about Quaker State now. Does it follow the same policies?
Quaker State Oil is the brand owned by Shell since 2002. But it has a long history dating back to the 19th century in Oil City, Pennsylvania. Many customers like you know it for its high-quality motor oils to enhance engine performance and better protection. As I said, it offers quality oil, but the brand often sells it at lower prices than its competitors (10).
Extensive Experience in the Industry
Of course, if you have a company of 100 years of experience, you will surely find a way to provide affordable products to your customers. But it doesn’t mean you will not make profits from it. In the same way, Quaker State keeps production costs low and it is reflected in its oil pricing.
Leveraging Economies of Scale
Being a part of Shell, the brand benefits from large-scale production and distribution networks. Also, it leads to cost savings that consumers can pass on.
Value-based Pricing Strategy
The company sets its prices based on the customers’ perceived value of its products. Besides, the value packs of Quaker State motor oils include multiple quarts and a filter. For this, you can save more money on the overall cost of your oil change.
Promotional & Advertising Strategies
For sure, the brand promotes the superior quality and performance of its motor oils. In this way, it reinforces the perception of value among its customers. As a result, it can maintain affordable pricing than other brands.
Price Comparison Among Quaker State Oil and Other Brands
Indeed, we can save more money if we prefer this brand among others. If you think of oil filters, the Quaker State oil filters are available within $1.96-$2.49 range. Sometimes you can find it at $1.75 each (11).
While researching, I have found (per quart):
- Quaker State Engine Oil 5W30 costs $7.39.
- Mobil 1 Full Synthetic High Mileage Engine Oil is priced at $7.97.
- Mobil 1 ESP Full Synthetic Motor Oil is $9.87 (12).
Quaker State Oil also offers a 10-year or 300,000-mile warranty on 15 different engine components. So, it can add value to its price (13). Furthermore, its synthetic blend oil is one of the best for its price. It offers good protection and maintains viscosity from the start (14).
Now you may think – cheaper oil means cheaper efficiency. Honestly, you are not thinking right. Why? Well, Quaker State Oil is known for its efficiency and protection, especially during city driving, hauling, and towing (15). It also holds a slight edge over Mobil 1 in maintaining a clean engine and minimizing sludge (16).
Production and Distribution Costs of Quaker State Oil
In this part, I will explain the factors relevant to the product costs of this brand in easy ways:
Cost of Crude Oil
The cost of crude oil is affected by supply disruptions triggered by political events. Also, changes in production capacity and the overall global economic performance are also matters to note(17).
The Production Process
Do you know about production minimization? It means maximizing oil production and minimizing total production costs simultaneously. However, it plays a significant role in determining the production costs (18).
- The production strategy includes producing a large volume of motor oil. It helps to reduce the per-unit costs.
- Quaker State uses state-of-the-art manufacturing processes. It helps to produce high-quality motor oil efficiently.
- This brand sells its motor oil directly to retailers. It helps to eliminate the middleman and reduce costs.
The commitment to sustainability also influences the production costs. It is consistently working to improve its processes to minimize environmental impact.
The Distribution Network
As a brand of Shell, Quaker State accesses to a vast and efficient distribution network. It enables the company to deliver oil to various markets at a lower cost.
Loyalty Programs (LP) – A Way to Save Money on Quaker State Oil
LPs are critical tools in the oil industry to identify, reward, and retain profitable customers (19).
In case of Quaker State, it offers a unique customer loyalty program for U.S. installers. These installers purchase from a contracted Shell distributor. Thus, this program includes coupons for future qualifying oil change purchases and other offers (20). You can find these coupons at both online and offline stores.
Then again, the SHARE program! It aims to build a rewarding relationship between distributors of Quaker State and their customers (21).
Another program, Shell Lubricants Instant Expert Program improves customer loyalty. It increases revenue potential for automotive technicians providing oil-change services. Moreover, it recommends the right products for their customers (22).
Outlook for Quaker State Oil – Will You Get Its Oil at a Lower Price in the Future?
Quaker State saw record profits in 2022. It is expected to continue investing in future strategies in 2023 (23).
The global mining lubricants market is a sector relevant to Quaker State. It is projected to grow at a CAGR of 3.8% from 2022 to 2030. In this way, it will reach an estimated USD 8.95 billion by 2030 (24).
In the United States, the lubricants market is probable to register a CAGR of 2.54% over the forecast period of 2023-2028 (25).
Quaker State has also been innovating with new products. Examples include the Quaker State Higher Mileage Engine with Slick 50 Motor Oil (26). In terms of product offerings, it may continue to expand its range of motor oils to cater to the diverse needs of its customers.
Final Words
Why is Quaker State Oil so cheap? I hope you have understood how to save some bucks by choosing this oil. However, I am recapping the whole discussion if you are still confused.
Supply, demand, production and extraction costs, oil quality, and others are the main reasons. Besides, sufficient business experience, value-based pricing strategies, and different loyalty programs are reasons for getting affordable Quaker State oils.
Though you get cheaper oil from the brand, the company never compromises the quality of its oil and other lubricant products. Also, the expert distributors are affecting the price.
Thanks for reading this discussion. Have a nice day!
