Suez Canal, Major Football Transfers and the Oil Market
When I first saw the images of the recent Suez Canal incident, I thought it was photoshopped. To put the size of the ship into context, it is longer than the Eiffel Tower and weights 220,000 tons. The salvage teams shovelled 30,000 cubic meters of sand to free the ship, which has now cleared the canal for business as usual.
It’s amazing to think that 12% of world trade passes through the canal and approximately 1 million barrels of oil a day. Therefore, it wasn’t a surprise to see a rally in the oil price when so much supply was sat in a shipping traffic jam.
It’s sometimes impossible to ignore oil prices. They affect everybody on a day to day basis and many of our stakeholders are interested in playing the commodity markets – particularly oil.
What has this got to do with the Football Transfer Market?
An interesting article that came into my inbox was the research undertaken by a group of economists on the correlation between oil price fluctuations and large transfers in the European football leagues. What really caught my eye was the following quote from Uni Hoeness, President of Bayern Munich in 2019 who said:
“My friend Pep (Guardiola – manager of Manchester City) told me what happens when he wants a player that costs more than €100 million. … He puts some videos together and goes to see the Sheikh. There is an opulent feast put on, during which he teaches the video to him and the money is transferred.… The next day, the Sheikh raises the price of oil a little bit and recovers the money.”
In the 2010s, three of the top five spending clubs in Europe had links to oil – money spent in brackets:
1. Manchester City FC ($1.71bn, transfermarkt.com) – owned by the royal family of Abu Dhabi (holds approximately 6% of oil reserves)
3. Chelsea FC ($1.47bn, transfermarkt.com) – Roman Abramovich who sold Sinbeft for £7.36bn to Gazprom, which is Russian state-owned
5. Paris St. Germain (1.44bn, transfermarkt.com) – state-owned by Qatar (holds approximately 1.5% of oil reserves)
The economists found that in the days after a large transfer had been announced by these clubs, the oil spot price increased – coincidence?
If you have a bit of time on your hands, there is 78 pages of research for you to get your teeth stuck into!
If the economists are correct in their research, it looks that those who pay for petrol and other oil products are those that pay for the players of PSG, Manchester City or Chelsea, whether you are a fan of these clubs or not.