TRANSPORTATION SAVINGS FOR HORSE OWNERS IN 2015

With expenses for maintaining racehorses almost always rising, owners in the United States have welcome news for a change:  Their costs of transporting horses via truck and plane should level off, if not decrease, as a result of the burgeoning world oil supply made possible by horizontal drilling and hydraulic fracturing in the United States, as well as unabated production by OPEC, in particular Saudi Arabia.

The Energy Information Administration estimates that U. S. crude oil production will surge to a 45-year high in 2015, reducing demand for imports and lowering prices.  Imported oil should decline to 25% of total production by 2016, down from 60% in 2005.

U. S. crude oil prices have plunged by about 40% since the summer and gasoline prices at the pump have followed.   Price declines of this magnitude matter greatly for tractor-trailers that routinely haul horses over distances like the 1,300 miles separating Belmont Park and Gulfstream Park; and the fuel savings for a cargo plane flying horses 2,800 miles from coast to coast (or abroad) are even more significant.  The International Air Transport Association projects that the world’s major airlines will see $12 billion in fuel-cost savings in 2015.

While horse-transport companies improve their profit margins when fuel prices decline, competition among carriers is likely to result in them passing on some of the savings to customers.   At the very least, it will be increasingly difficult for carriers to justify raising their prices, owing to fuel costs, in a business climate of flourishing oil production and downward pressure on gas and diesel prices.

Dramatically reduced gasoline prices should also have a salutary effect on the demand for sports and entertainment enterprises like horse racing.  Goldman Sachs estimates that the current decline in gas prices is equivalent to a $125 billion tax cut for consumers.

Copyright © 2015 Blood-Horse Publications.  Used with permission.

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