While here in the US we’ve been euphoric about how cheap gasoline has become, there are some significant negative effects that are starting to be felt in the market and therefore in motorsports. While the producers around the Persian Gulf are pumping out oil like there’s no tomorrow, demand is waning in many Western countries as, among other changes in consumption behavior, we’ve sought out more fuel-efficient vehicles in every segment, even pick-ups. If you want to learn more about the whys-and-hows of the precipitous drop in oil prices, here are three nice summaries of the situation:
- Oil Prices: What’s Behind the Drop? Simple Economics — NY Times
- What’s Driving the Plunge in Oil Prices — Fortune
- The Basics on Why Oil Prices Are So Low and What It Means — The Street
Ok, fine, this isn’t a finance blog, and we’ve all taken ECON 101, so how does this tie into motorsport? The petroleum industry has long been a part of the motorsports landscape. I mean, they don’t call us car nuts “petrol heads” for nothing, right? Here in the US, Sunoco has a major role as being the official fuel supplier for NASCAR and IndyCar, and many other companies, such as VP Racing Fuels and Lucas Oil Products, support smaller motorsports series such as Rally America and the TORC off-road racing series. Other companies sponsor various racing teams directly such as Shell’s support of Team Penske in NASCAR and IndyCar and Repsol’s support of the Honda factory team in MotoGP. As the price of oil, and therefore the price of derivative products, continue to plummet, so do the profits of the producers.
The tightening, and sometimes vanishing, margins have resulted in numerous layoffs, especially in Texas and Louisiana. Smaller companies which don’t have the economic resilience of their larger counterparts have felt the pinch even more. Hartman Oil joined Sarah Fisher Racing at the end of the 2011 season and helped to revitalize the small team. For the 2015 season, Ed Carpenter Racing and Sarah Fisher Hartman Racing joined their single-car efforts into a unified two-car team. The merger had very positive results as the team recorded five podium finishes with two wins, mostly from the 2011 Indy Lights champion, Joseph Newgarden.
This week, official word was released that Hartman Oil was withdrawing from the team. This left Sarah Fisher’s position in the team unsupported. Carpenter’s position is still financially backed by the Fuzzy’s Vodka sponsorship, but without the support of Hartman Oil, Fisher and Carpenter were forced to part ways. Fisher will remain connected with the team as a business partner and provide assistance in locating and securing future sponsorship partners.
“It’s important for IndyCar to have strong entries on grid and this team needs to be two of them, so I will do what I can to help them with business developments and continue with solutions for our current partners,” said Fisher. “I am lucky to have been an owner in this series for eight years, having incredible memories along the way. Lastly, I am extremely thankful to Wink and Libba Hartman for everything they’ve done to help us get to where we are today.”
In the Formula 1 world, rumors of a potential dwindling of the Venezuelan oil money has compromised Maldonaldo’s position on the grid. Renault is not in the desperate financial straights that LotusF1 was and therefore isn’t as willing to take the risk running the accident-prone driver, especially given that the incoming check may not be as large as it has been in previous seasons. You can read Todd’s comments regarding this in his recent article, ‘That’s strange, I wonder what’s causing all the accidents’ Maldonado out.
The question now is, “Where does this stop?” Earlier this month, the Indianapolis Motor Speedway announced that PennGrade Motor Oil has signed a three-year, $5M deal to be the presenting sponsor for the Indianapolis 500 Mile Race. This is the first time in history that the 500 has had a presenting sponsor, and it has certain segments of the fandom upset, a stance I do not understand. With no immediate end to the over-production of crude, and persistently sluggish demand, I can’t see petroleum-based companies having a good time of it in the coming years. What does this mean for this new partnership that PennGrade has with the Brickyard, or Shell’s participation with Penske, or any number of the other oil-based relationships that exist throughout motorsport? I’m not sure. I’ve not been trusted with the Magic 8-Ball yet. I don’t expect it to be a smooth road covered in roses, though.