Stole this from a post at classicfunnycarboard.... It mentions nitromater so i figured it was relevant to post it here on this subject
This was sent out today to all NHRA nitro teams:
Dear NHRA Nitromethane Customer:
(I don’t want you to look at this as impersonal—after reviewing the content below, please feel free to call me on my cell phone or I’ll talk to you at Indy.)
You’re likely aware of the many “news” stories posted on various internet websites about the price of nitromethane, along with continuing commentary by interested parties. These stories generally cast VP in a negative light and perpetuate the perception that VP is part of some "conspiracy" with NHRA to gouge racers on nitro prices. These rumors are not accurate or fair.
First, this “conspiracy” theory is not even close to reality. VP pays NHRA no commission, no royalty or anything else from nitro sales. Our sponsorship agreement with NHRA from its inception in 2000 through 2009 under the current extension includes no compensation to NHRA in any form for nitromethane sales.
Second, you may have seen a rumor posted on an internet website recently about the “likelihood of another nitro price increase to $2000 per drum by the U.S. Nationals at Indy.” This rumor is completely unfounded. In fact, it’s quite surprising that it was posted given that the editor for the site in question was informed just as you were that our price of $1822 was effective at least through the U.S. Nationals at Indy. As a matter of fact, what seems likely is that prices will be reduced after Dallas, given that prices are starting to ease in China.
Third, I’d like to pass along some information to put the current price of nitromethane in perspective. To that end, I’ve attached below two excerpts—one from a thread posted on nitromater.com and the other from an article posted on competitionplus.com. Both reference the cost of nitro at IHRA races this season. Comparisons have frequently been made between prices charged for nitro at IHRA events and VP’s prices at NHRA events, primarily to make the case that VP's prices are too high.
The first excerpt includes a quote from Jim Walczak, who's personally involved in servicing IHRA races with nitro, wherein he says, "The price of that VP Nitro... probably not that far off from what it should be....(IHRA nitro) should have been sold at something closer to $1,550 - $1,650 per drum (if we were trying to cover overhead and such)."
In the second excerpt, Terry McMillen is interviewed about his procurement of nitro for IHRA races. McMillen said, “I just got a new price yesterday (August 5) and just my cost alone was $1700 (for a 500 lb drum). And we have to have it delivered on top of that. The $2000 price frame is definitely in sight now. In IHRA there’s not a profit margin…we’re just basically moving it for what we have in it.” He continued, “(from the 53-gl drum), you got to pump it off into 40’s…by the time you add all the extra costs…we’re going to have another $60 in it. Plus, you add the freight…it will be $1800.”
These remarks are telling, given that both reference prices very similar to VP’s price at NHRA events. Mr. Walczak’s “$1650 per drum” reference is within about $170 of VP's current price at NHRA, where VP incurs significantly more overhead than those involved in servicing IHRA events, given the wider geographic scope of the NHRA race schedule, contingency payments to racers, incremental costs to comply with DHS, transportation of partial drums after races, etc. Mr. McMillen’s figures are also right in the same ballpark with VP’s.
In all the continuing discussions of nitro pricing on the internet and elsewhere, these perspectives are perhaps the most meaningful, given that both gentlemen are the only ones actually involved in providing anything remotely resembling the service VP provides to NHRA and therefore have the experience and data to render an intelligent opinion. Every other comment, opinion or judgment reported on the internet and other media about the nitro pricing issue to date has come from someone who has never walked in VP’s shoes, never jumped through the hoops we’ve jumped through to secure a supply, never provided the level of service VP provides, never provided the responsible custodianship of material so critical to the sport and without which would spell the death of drag racing.
To put things more into perspective, compared to the cost of nitro when drums were priced at $850 at an NHRA event, the current cost of buying nitro in China is 3.5X higher, while for some container loads we’ve paid more than 4X the cost we incurred for an $850 drum. Along with the cost of the material, the cost of ocean freight has doubled during the same time frame. And just like you, VP’s cost to drive to each race has increased dramatically with the price of diesel. Despite all this, the cost of nitro to you at $1822/drum is about 2.6X the earlier price of $850, adjusted for 42-gl drums. Bear in mind, what VP delivers to you is a top quality product. It’s not simply a commodity taken directly off the boat from China and poured into your tank. We analyze, test and certify our nitromethane to confirm its quality, along with ensuring your health and safety and that of NHRA fans. As you’re a business owner who handles nitromethane, I’m sure the health and safety of your employees is of paramount importance to you.
In other postings on the internet, it’s been suggested VP was not proactive in preparing for the nitro shortage. The fact is VP was as proactive as possible given the information available to us at the time. First, until earlier this year we were at the mercy of importers, i.e., middlemen. We ordered nitromethane in October 2007 from our supplier, fully expecting delivery in time for the beginning of the 2008 season. When our supplier failed to fill multiple orders, we became almost entirely dependent on VP’s existing inventory of nitro that, fortunately, was sufficient to see NHRA through the first part of this season. That inventory originally was destined for not only NHRA but our hobby fuel and industrial customers. In the end, it essentially saved the beginning of the 2008 season for NHRA. While dealing with these supplier issues through the off-season we, along with the rest of the nitromethane industry, were simply unaware of the impending worldwide shortage of nitromethane. The fact that the shortage did subsequently occur simply accelerated an already difficult situation.
Note that VP itself didn’t escape injury from this shortage. By earmarking 100% of the nitro inventory for NHRA, VP had to forego all the business and profit we normally would see from the hobby fuel and industrial markets, both of which are more profitable to us than drag racing. It’s uncertain at this point if we’ll ever get all that business back. But the point is NHRA Drag Racing and drag racing in general is our core business.
What has VP done since then? We’ve negotiated long term supply agreements direct with producers in China and also plan to open our own office in China. This will greatly facilitate our supply line and give us more influence on quality, shipping and other issues. We’ve secured storage bunkers for stockpiling a year’s supply of nitromethane, so drag racing will never again be held hostage by producers, government embargos or natural disasters.
We will continue to supply products that are safe for use by and around racers and spectators. And we’ll continue to work with the governmental agencies that control our destinies. As you know, nitromethane is on the DHS list of dangerous chemicals and is currently under scrutiny. This is a critical issue that must be taken very seriously. We are working on the continuing usage of nitromethane in NHRA now and long into the future.
I want to assure you we will always be good stewards of drag racing and do our best by you as a customer. I would ask you to respect the difficult position NHRA is in. They’re trying to balance the interests of all parties involved in the nitro issue while ensuring the long-term viability of the sport. And I would ask you to respect VP and give us the benefit of the doubt. When you see rumors or alleged “news” on the internet or hear it elsewhere, consider the source. Please don’t hesitate to contact us to check your facts.
I value you as a customer and hope to remain in your service far into the future. I understand your passion for the sport. I have it too.
Best regards,
Steve Burns