History will show us that over four decades
ago, a quartet of Persian Gulf nations, comprised of Iran, Iraq, Kuwait and Saudi
Arabia, along with Venezuela, formed a group called OPEC with the primary objective
of obtaining higher prices for their crude oil. The plan had a reverse effect
in the early going as prices fell from $10.85 per barrel (in a more modern pricing
scale) to as low as $7.46, according to Benjamin Zycher's Encyclopedia of Economics
report. In the 1970s, their movement began to take root, however, and the convenient
excuse of the Arab-Israeli War caused the price to skyrocket to upwards of $27.00
wake of an exclusive contract brokered with VP Racing Fuels and Wego Chemical,
an importer of Chinese-produced nitromethane, the cost of the exotic fuel vaulted
from $650.00 a barrel to $900.00, with the promise that it could go even higher
by the end of the summer.
If this seems like business as usual in the modern
day corporate world, be advised that VP was also the exclusive distributor for
the American-made Angus brand of nitro. So what does this all mean? The emotions
run the gamut on the situation. Depending on what side of the track the individual
is on, the attitude among some is that it's simply the free enterprise system
at work. Others claim that it's nothing more than a monopoly being supported by
the NHRA. Prior to the deal with VP Racing Fuels, the Wego brand had been distributed
by Sunoco Race Fuels.
|Bill Corwin (yellow shirt) says that Sunoco Race
Fuels was never afforded the opportunity to bid on the Wego nitro distribution
even though they had branded their name on the product for a while.|
An online dictionary defines a monopoly as "exclusive
control by one group of the means of producing or selling a commodity or service.
Monopoly frequently arises from government support or from collusive agreements
among individuals." It also describes free enterprise as "the freedom
of private businesses to operate competitively for profit with minimal government
The law takes a stern view on what it sees as a monopoly.
According to the Legal
“Every person who shall monopolize, or attempt to monopolize, or combine
or conspire with any other person or persons, to monopolize any part of the trade
or commerce among the several States, or with foreign nations, shall be deemed
guilty of a felony, and, on conviction thereof, shall be punished by fine not
exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or
by imprisonment not exceeding three years, or by both said punishments, in the
discretion of the court “
The nitro situation actually began last season with a trail of
cause and effect scenarios that would make even the most seasoned cloak and dagger
agents throw up their hands in frustration. The combination of market competition
and the pressure to increase participation in the nitromethane ranks had driven
the price of nitromethane to the lower echelon of pricing, mainly in the mid-$600.00
range. According to various sources within the industry, Angus was not exactly
enthused about the lowball price tag on nitro, especially with the added scrutiny
that had been placed on the product following convicted murderer Timothy McVeigh's
inclusion of the chemical in a bomb that was used to blow up the Oklahoma government
building. Over $2,000 worth of nitro was sold to McVeigh at a Texas-based drag
strip according to government records online.
Schumacher is one of the hardest hit team owners as his nitro bill promises to
increase substantially. He points out that the 2004 offseason was his most expensive ever.
The bottom line is that Angus was ready to pull out of the nitromethane
business entirely, and it was likely that the demand could not be filled by Wego
in their absence. Sources indicate that parties involved calmed the situation.
Everything heated back up again when Tony Schumacher
reportedly made the quickest lap in drag racing history with the Chinese nitromethane
in Reading, Pa. With a rumored price increase looming on the horizon for the Angus
nitro, it appeared the Wego brand would become the choice of many teams, especially
with the perceived impression of improved performance and better value. The chatter
went silent in the months that followed, however, until days before the PRI show
last December when officials at Sunoco Race Fuels were informed that they could
no longer brand the Wego nitromethane. At this point, things took a strange twist.
to the Sunoco Race Fuels representative Bill Corwin, VP Race Fuels was awarded
the contract without any kind of warning that such a deal was taking place.
it had been our choice, we would have been happy just to continue branding the
nitromethane," explained Corwin. "VP made the deal to start importing
their fuel and that caused a problem for us to secure a supply. It worked well
for them, but it didn't for us."
Immediately following the decision
to market both the Angus and Wego fuel, VP Racing Fuels raised the price per drum.
Rumors of homeland security regulations leading to the price increase permeated
the industry. That prompted a call to the Department of Homeland Security's press
department by CompetitionPlus.com. Such claims were denied. The representative
dismissed the claims as nothing more than hearsay and added they held no merit. The government did pay closer attention to who was purchasing the fuel though.
are always concerned with the escalating costs to race teams. In the nitro issue,
I'm not sure what we could do. Naturally we're concerned as the costs go through
the roof. Of course, the cost issue is out of our control because it is a free
market. We have wanted to maintain sources of nitro to supply the race teams.
We are very comfortable and secure with the two suppliers we have when it comes
to handling a product like nitromethane." - Graham
Steve LeSueur, owner of Steve's Fast Fuels, was the distributor of
the Sunoco-branded Wego last year. When the deal was brokered by VP, he was offered
a job as a consultant with the company as well as with Angus and Wego. He had
a front-row seat to what was going on behind the scenes.
"The companies were disenfranchised
with the amount of money that they were getting for their product," explained
LeSueur. "It really didn't involve the money issue. Nitro is a pretty sensitive
chemical. Issues were being raised that suggested nitromethane might not have
been available to us to use as a racing fuel."
In fact, LeSueur sees
Sunoco Race Fuels as being in the wrong place at the wrong time in the situation.
was just an innocent bystander here," explained LeSueur. "Their nitro
was always a product that came through me. There was the perception that it was
their fuel when the real truth of the matter is that it was from Steve's Fast
Corwin confirmed that his company allowed LeSueur to brand
the name in order to take advantage of their contingency program offered in the
NHRA. There was one twist that Corwin alleges led to the deal between VP Race
Fuels and Wego. Sunoco Race Fuels was given no advance warning.
to Corwin, "When the deal was done, we weren't consulted with, nor did we
have the opportunity to negotiate." LeSueur declined to on any of the details
of the agreement.
President Kenny Bernstein offered no comment although sources indicate that the
organization is very concerned over the issue.|
Of course, the ones who stand to lose the most in this situation are
the quickly-disappearing independent nitro teams, the nostalgia sanctioning bodies
and the nitro-burning Top Fuel Bikes.
Even the well-financed
teams will take a hit. Team owner Don Schumacher pointed out that this off-season
has been the most expensive in drag racing since he's been involved.
had to upgrade our blowers and heads, and now there's the fuel issue to deal with,"
This is being done to the professional racers
at a time when sponsorships are hard to find. With the costs escalating the way
they are, it's just tough for team owners to deal with."
should know. The extra cost is certain to drive his fuel costs upwards by nearly
$75,000 a year. He's not buying into the notion that government regulations are
behind the price increases. "I don't feel that there's a concern for homeland
security causing the price to go up," explained Schumacher. "That's
pretty much just the spin that these two suppliers have given to anyone that will
listen to them.
"I really don't see the price of fertilizer and the
other chemicals McVeigh used going up," added Schumacher. "I think the
two companies got together and they have a monopoly on nitromethane. I certainly
hope that can be changed."
When asked if they intended to intervene in the situation, the NHRA's
Graham Light pointed out there's not a lot the NHRA can do about the situation.
"We are always concerned with the escalating
costs to race teams," said Light. "In the nitro issue, I'm not sure
what we could do. Naturally we're concerned as the costs go through the roof.
"Of course, the cost issue is out of our control because it is
a free market. We have wanted to maintain sources of nitro to supply the race
teams. We are very comfortable and secure with the two suppliers we have when
it comes to handling a product like nitromethane."
Interestingly, Schumacher's electric company has
a location in China, and he defends the quality of Chinese-imported nitromethane.
think the Chinese chemicals are perfectly good," explained Schumacher. "Alan
Johnson used it in our car and it ran well. It shot our car to the top. It's not
harsh on anything. It's a good product. I would think that any other fuel that
came out of China would be a duplicate of that."
|Some feel that even though the price of nitro
has increased from $650 to $900, the price could soar even higher. The price has
been well into the $1000 range before. Competition in the market and the dwindling number of fuel cars brought the price down.
Schumacher also pointed out that he tested
some fuel that VP Race Fuels imported from China once before and it worked perfectly
"There's a lot more nitro producers out there than Angus and
Wego," added Schumacher. "There are some pretty strong team owners that
have connections in China and I even have a plant in China. I'm sure Connie Kalitta
flies back and forth to China. We'll just see what develops."
the notion that prices will increase has some team owners wondering what it will
do for their sponsor searches in the future.
I see with it is that in June it may go up to $1500 a drum," Schumacher continued.
"Hopefully there will be one way to create a competitive environment. Another
fuel supplier for the nitro teams would be good."
The cost of nitro
skyrocketed in the early 1990s when an explosion at the Angus plant limited production
and drove the price to around $1,500 a drum. When asked if the price will go up
even more, LeSueur responded, "That's something I can't comment on."
the Professional Racers Organization has been looking into the situation. PRO
President Kenny Bernstein declined any comment on the situation. Several calls
were made to Wego Chemical's Joe Rabagila and messages were left, but no calls
|Could a spec fuel be on the horizon? Our sources say the NHRA is considering a move in that direction.
While greed seems to be on the mind of many
looking at the situation, when asked if the nitro suppliers couldn’t care less if they provided nitro for drag racing,
LeSueur offered no comment. He also declined comment if there were any feelings
of guilt towards the racers paying such an exorbitant amount.
"I don't know that there are any bad guys in this situation,"
said Corwin. "I do know that we are good guys and we'll help support other
products at the track as long as we can help keep the pricing down. We didn't
have a large amount of nitro business, but we did go around to the teams and ask
for their support because we felt it would be better to have two suppliers instead
Sunoco is still planning to brand the fuels they can supply to the
racers. Nitromethane just won't be one of them.
"This is being labeled and publicized as a safety issue,"
explained LeSueur. "The companies are pushing for nitromethane
to be used in the right way and that includes making sure it doesn't
fall into the wrong hands. If it is always used in the right way,
we will be able to use it as a racing fuel for many more years."
points out that the extra steps that the companies involved are undertaking to
ensure the fuel doesn't fall in the wrong hands is a factor for driving up the
price. The extra risk warrants an extra profit margin to cover them. He also points
out that safety seminars are scheduled to address the handling and care of nitro
in Pomona and Gainesville. According to him, a program is being instituted to
create only one buyer from each team.
More situations like the Oklahoma
City bombing and some experts close to the situation feel that nitromethane may
be taken away from the racing community altogether.
|Tony Schumacher's 4.4-second run on the Wego
Chinese nitromethane increased the popularity of the fuel.|
Sources indicate the NHRA is seriously considering a spec fuel for
the nitro ranks similar to the agreement they hold with Goodyear for tires. This
comes in the wake of at least one team reportedly testing a batch of nitro at
Las Vegas Motor Speedway that came from neither Angus nor Wego. The results were
positive, although the team refused to go on the record with their identity at
The idea of a spec fuel is something that has Schumacher scratching
his head and wondering what is going to come next.
"Spec tire, spec fuel, what next? A spec supercharger,
blower or cylinder head? The way things are going this is going to increase the
demands for sponsorships by nearly a million dollars."
operating costs are something that drag racers have become accustomed to since
the sport burst onto the scene in the early ‘Fifties. However, when it comes
to the three necessary evils in drag racing - fuel, tires and insurance, price
increases in these arenas march to the beat of their own drum.
In this instance, the drum continues to increase in price.