If you discount the cost of building the plant, the Group II base oil process is fundamentally more economic than Group I base oil production.
The Group I process starts off with raw Vacuum Gas Oil (VGO) and then removes low VI, unstable aromatics (solvent extract), paraffin wax (it's bad for low temp performance) and tar-like asphaltenes if you're making brightstock. It's very feed dependent but for every 100 units of VGO feed, you might only end up with 65-75 units of refined base oil.
The Group II process, by blasting the VGO with hydrogen over a selective catalyst, gives you more refined base oil but with some loss to gaseous waste. Overall the process is more cost-efficient. The fact that Group II is water white, contains no sulphur and is quite a lot more stable is sort of a freebie.
Base oil markets are now simply reflecting this lower cost advantage in their pricing.
