Finding the Winners in the Crossfire
So, where does a savvy investor look when the price of crude oil starts to fall? You don’t look at the producers tearing each other apart. You look at the companies that treat oil as their single biggest headache. Think of it this way, when the price of flour plummets, you don’t necessarily buy the farm, you buy the bakery.
Airlines are the most obvious beneficiary. For giants like United Continental and Delta Air Lines, jet fuel can account for nearly a third of their entire operating budget. Every dollar saved on a barrel of oil flows almost directly to their bottom line. Suddenly, their margins look healthier, their balance sheets look stronger, and their shareholders might just have a reason to smile. It’s a simple, beautiful equation. Cheaper fuel could mean more profitable flights.
Then you have the refiners, the unsung heroes of the petrol station. Companies like Valero Energy are in a rather enviable position. They buy crude oil, which is getting cheaper, and turn it into petrol and diesel, for which demand remains stubbornly consistent. A wider gap between their input costs and their sale prices is, to put it mildly, very good for business.
