Sliding Oil is Good for Business

Brittney Barrett  |

Energy stocks have taken a major hit so far this week, falling two consecutive days and down 5.8% from Friday. The decline, according to some analysts, is the beginning of the end for the oil rally, which saw prices rise 17% for 2011. The market seemed shaken in the aftermath with commodities and the energy sector pulling down the market for the day falling price of oil is a boon for the rest of the economy.

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Shares in airlines, like Southwest (NYSE: LUV), Jetblue (NASDAQ: JBLU) and Delta (NYSE: DAL)  are bound to pare some of the year’s losses as the lower fuel prices allow for more competitive pricing. Expedia (NASDAQ:EXPE) and other travel sites may also climb higher as more people travel with the money they’ll save on gas. All this, provided the 3.3% drop in Crude oil today signifies a broad reversal of the rally with some staying power. Goldman Sachs recommendation that investors begin profit taking has been taken seriously, or so the week’s sell-off would indicate. There were also the reports from International Energy Agency, which represents big oil-consuming nations, and the Organization of Petroleum Exporting Countries that revealed a weakening demand in reaction to the high prices.

Sliding oil prices is good for business overall, even if it pulled down stocks today. The high energy prices had many companies anticipating weak Q2 outlooks but if they stay down, they could end up exceeding expectation. Depending on how far the price drops, retailers may also see some additional profits. When consumers are spending less money at the pump, they’ll spend more in stores and restaurants and even at the grocery store, meaning companies and likely their shares will benefit.


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