FUEL PRICES AND AVAILABILITY

Hugh Jengine · Joined: 25 Feb 2008 Posts: 206

Loads of rumours are flying about at the moment about price and availability of hobby fuel. Tornado, O'Donnel fuel etc due to be priced up from now, others very soon. Here's some facts taken from www.redrc.net :

FUEL DISTRIBUTOR:

1. Robk - Tuesday, July 29, 2008
uel Shortage Q & A
Ken Cutler, Senior Vice President
Great Planes Model Distributors

With all sorts of wild rumors and speculation flying everywhere
regarding the
availability of nitro methane hobby fuel, we thought that it would help
if we tried
to clear up the confusion by answering some of the most frequently asked
questions we have been receiving.

Q. I heard that one nitromethane factory closed which has created a
massive shortage in fuel. Is that true?

A. Not really. There are only two large capacity plants in the world
that produce
fuel grade nitromethane suitable for use in hobby fuels. One is in the
US, the
other in China. Both are still fully operational and conducting business
as usual.
The US plant that supplies many of the US hobby fuel bottlers has
decided to
temporarily reserve all of its production capacity for other more
profitable
business sectors such as pharmaceutical and agricultural products where
demand
is skyrocketing.
This decision left several bottlers scrambling to re-source their
nitromethane
supply, prompting them to eliminate availability of the over 20% nitro
blends in
order to conserve their nitro supply. This is a short term problem, not
a massive
shortage situation.
Great Planes has been assured by our factory that we have enough nitro
to
continue supplying all percentages of fuel, even those above 20%.
However, we
have been informed by Homeland Security that nitro percentages over 50%
can
no longer be produced. Current supplies can be bottled and sold but no
more
produced. There is absolutely no truth to the rumor that the FBI is
closing down
nitro methane plants because of Homeland Security issues.

Q. Is there a shortage of nitromethane production?

A. Yes and No. There are no problems related to the production of
nitromethane other than the Chinese factory being limited to a five day
work
week. This limitation is not new and is and has been a problem for all
factories in
most of the industrial areas of China for the past several years.
Nitromethane is
not being limited nor is it on allocation and from what we understand;
there are
no indications whatsoever that it will be.

Q. I heard that the fuel shortage had something to do with the
Olympic Games. Is this true?

A. No. The rumor that China wanted to clean the air in Beijing for the
Olympics
and shut down factories is true to a degree, but the factory that
produces the
nitromethane used in our proprietary fuels is not in Beijing and is not
affected.

Q. If there are no production problems or capacity problems with
nitromethane then why is there a sudden shortage of fuel?

A. Panic buying. The rumors which have led some to believe that there
would be
no hobby fuel available spread like wild fire causing panic buying and
hoarding of
fuel. Our own standard 8 to 10 week inventory of fuel was virtually gone
in a
matter of days as was our next re-stocking order. We literally went
through three
months of fuel inventory in less than two weeks. Until the supply chain
is fully
replenished which could take up to six weeks, there might be some on and
off
availability problems.

Q. If there is no nitro shortage, then why did you and everyone else
raise your prices on fuel at nearly the same time?

A. This would be a much more interesting story if this were about
international
intrigue, price fixing, collusion and price gouging, but it is not. The
truth is that
the cost to produce nitro fuel has been steadily increasing over the
past six
months and it has nothing to do with supply and demand and/or phantom
shortages.
Our bottler has not been passing all of these increases on to us
immediately and
we have not passed any of the increases on to you, our customers, until
just
recently. The cost of certain raw materials, methanol, propane and
sulfur that are
used to make nitromethane, are rapidly climbing. The price of sulfur
alone has
risen approximately five times in the last twelve months. Further
increases in raw
material costs such as plastic (for bottles) are a result of escalating
crude oil costs.
In addition, the factories are faced with a 17% loss due to the
elimination of
China’s export VAT rebates, an 18% loss due to the weakening of the
dollar and
increased freight costs due to higher oil prices. Currently we have no
guarantee
on our pricing and are being quoted pricing on a shipment-to-shipment
basis. We
expect nitro fuel prices will continue to increase, at least in the
short term.
Many of the other fuel vendors who were purchasing nitro in the US have
had to
re-source to the nitromethane producer located in China and also are
susceptible
to these price increases.

2. SMG - Tuesday, July 29, 2008
Just to add a few facts.

Angus, a daughter company of Dow Chemicals, who is one of the two Nitro manufacturers have decided to not supply NHRA with nitro methane anymore. At the same time, they have a statement on the homepage that clearly states that they would continue to supply NM to the hobby fuel producers.

Further, there is a company in the US who bought a huge stock pile of NM just before Angus stopped supplying the market and they are now holding the NM back, most likely to make a huge profit, once they’ll sell.

RC GOVERNING BODIES:

EFRA are aware of the issues regarding nitro and are already working towards reducing the levels of nitro used by each category of gas racing. A proposal to reduce the maximum permitted nitro level for each class is currently under discussion by EFRA’s technical committee for both the reasons of cost and to help reduce engine power. Sander de Graaf, the 1:8 Onroad Section Representative for EFRA, told us that the use of alternative bio fuels for the sport is being discussed.

timbo · Posted: Tue Jul 29, 2008 6:39 pm Post subject:

And we only want to run our cars, trucks etc.

Tim

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