Inside The Industry: What Lower Gas Prices Means for us
The gas pump is a friendly place these days, not the graveyard for one’s disposable income it once was. With the price of a barrel of oil cratering to levels not seen in almost four years under the weight of weak demand and a plethora of supply now that the U.S. is a key oil producer, U.S. consumers are getting what amounts to a tax cut at the gas pumps.
Oil prices have dropped nearly 30% from the spring peak, and wholesale gas prices are now at a near four-year low, according to Wells Fargo. West Texas Intermediate Crude fell 0.5% to $75.64 Monday. Every 10-cent decline in retail gasoline prices unlocks nearly $3 billion for the consumer to spend on other goods and services, according to Gina Martin Adams, senior analyst at Wells Fargo. She notes that in the past 12 months U.S. consumers have spent $357 billion filling their tanks with gas.
The national average price for a gallon of regular gas on Monday was $2.885, according to AAA. That’s down from $2.893 Sunday and $2.927 a week ago. A month ago, a gallon of regular fetched $3.144. The nearly 26-cent drop in the past month equates to roughly $7.8 billion in freed-up cash for consumers to either buy other stuff or pay down debt.
So what types of stocks benefit most from falling gas prices? On the consumer staples side, food and beverage stocks tend to fare well. But, industrials, especially airlines and air freight, “may offer the best way to take advantage of lower energy prices,” says Adams.
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