Minnesota auto shops raise prices as oil costs increase
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A full synthetic oil change at Turbo Tim’s used to cost under $100, but now that isn’t the case.
The shop absorbed the losses on oil changes and other oil services for nearly 6 months before raising prices by about 20 to 30 percent nearly 5 months ago, according to St. Paul-Midway store manager Troy Muchow.
“We weren't really aware how long or how much these prices were going to be changing, but they're not changing and they're not falling back down, and we were forced to make some hard decisions that we didn't want to make as a company,” Muchow said.
Price increases and supply issues in the auto shop industry are tied in part to disruptions in global oil markets, since the U.S. war with Iran began in February. Roughly 20 percent of the world’s petroleum supply passed through the Strait of Hormuz, a key shipping route out of the Persian Gulf.
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Muchow said they typically use 300 to 400 gallons of motor oil a week, but because of supplier shortages, they’d be lucky to receive half of that. They’ve been forced to go to other suppliers to meet their needs.
“They're trying to be fair to their customers, and they just are looking at the grand scheme of things, so instead of filling up some people, some of their customers, they're just trying to be fair, which is totally understandable, so it leaves a shortage for not just us, but a lot of automotive shops out there,” he said.
What are the experts saying?
Lake Speed Jr., a lubrication specialist, said refineries are choosing to make more diesel fuel instead of the synthetic-based oil because it’ll give them the highest profit margins.
“So even when there's a supply shortage in Group III synthetic base oil prices that are at an all-time high, they can still make more money-making diesel, so they're decommissioning long term, making synthetic base oil, so they can make more diesel,” Speed Jr. said.
He cited a HF Sinclair's Petro-Canada Lubricants plant in Mississauga, Ontario, where the company plans to phase out base-oil refining during 2027 as an example. This matters in Minnesota because much of the state’s crude oil supply comes from Canada.
Speed Jr. said oil companies aren’t the root cause of the issue, but that “this is a geopolitical problem that caused this.” He believes there’s more to come though and said this is just the “first big wave" of retail price increases.
“If nothing changes, and if raw material prices stay high, there's probably another wave of raw material prices coming,” he said. “If supply stays limited and people can't get the raw materials, then basic economics kicks in and people are going to pay more to get them, it's a mess.”
Naafey Sardar, an assistant economics professor at St. Olaf College, said the increased prices will ultimately keep falling to the consumers who need oil changes.
“I still feel like people will have to find a way to afford that, but it's gonna maybe come at a cost, so maybe people start racking up credit card debt, but they're eventually going to have to find a way to pay for it,” he said. “It's like food, you're still going to need to eat food, irrespective of or no matter how expensive it gets.”
If the war drags on until the end of next year, he said the economy could fall into a recession.
“You go back to the recessions the U.S. experienced in the early 90s, in the 70s and the 80s,” he said. “Those decades or those recessions were essentially preceded by higher oil prices and higher energy prices.”
Tyler Schipper, an associate professor of economics at St. Thomas University, said even if the war we’re to end today, consumers would still feel those high costs.
“Even in a post-Iran conflict world where all of this is resolved, there are still going to be lingering higher costs simply because the world has changed.” Schipper said. “Iran realizes it has this this economic, for lack of a better word, trump card that it can rely on in the future to disrupt international trade.”
