As oil prices keep dropping, certain associated industries can benefit. The first group of industries should not come as a surprise. Industries, like transportation and airlines, for which oil is a significant direct cost benefit from lower prices. Other industries benefiting from lower oil prices are those that depend on consumer spending. When buyers cut fuel spending, they have more money to spend in other areas. Below is a discussion of five industries that can benefit from lower oil prices.
The airline industry is one of the biggest beneficiaries of reduced oil prices because fuel is one of its most significant expenses. As oil prices declined during the second part of 2014, airlines’ stocks recorded steep gains. However, these gains were tempered somewhat when the price of crude bounced back in 2015.
Freight and shipping companies can also benefit from lower oil prices, as they also have substantial fuel costs. Among the major freight companies, FedEx has seen the biggest gains. Rival company UPS actually saw a slight decline because operational issues negated the benefit of reduced oil prices.
This industrial sector includes businesses such as retailers, travel agencies, entertainment venues, and restaurants. Such companies indirectly benefit from lower oil costs, as consumers have more money to spend because they’re not paying so much for fuel. The increased performance of companies like Netflix can be partly attributed to the effects of lower oil costs on profits.
Although today’s consumers are likely to spend fuel savings on entertainment and other extras, it is safe to say that part of the budget will be spent on food and drinks. Therefore, grocery stores and restaurants can benefit from a lower oil price.
A low oil price means that a vehicle buyer will typically opt for a larger, more costly ride (such as a truck or SUV) rather than a smaller, more fuel-efficient model.
The Final Word
Low oil pricing can benefit a variety of industries, such as transportation and airlines. However, other sectors, such as consumer staples and discretionary spending, can benefit as well. Go online here to find out more about oil prices and investments.