Thursday, October 16, 2014

The Downside & Upside of Cheaper Oil (excerpt)

The plunge in the price of crude oil should be a positive for the S&P 500 Transportation index. However, in addition to using diesel fuel to power their locomotives, the railroad industry has enjoyed a booming business in transporting crude oil produced by shale drillers. Drillers might have to stop their operations if they turn unprofitable at lower oil prices.

On the other hand, the plunge in gasoline prices is a big positive for consumers. The nearby futures price of gasoline is down 30% since this year’s peak during the summer. Retail sales of gasoline totaled $535 billion during September at a seasonally adjusted annual rate. So a 30% drop in the price would provide a $161 billion windfall to consumers.

Today's Morning Briefing: Early Halloween. (1) Trick or treat? (2) From nothing to fear to plenty of fear. (3) Bears are hiding in the correction camp. (4) Sentiment takes a dive. (5) Cheap oil is good for consumers, but not so good for railroads. (6) Airline stocks have been contaminated. (7) Meet Obama’s Ebola “czarina.” (8) The commodity super-cycle was the bubble this time. (9) Lots of blank bullets. (10) Retail sales don’t add up. (More for subscribers.)

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