Oil going below $35 a barrel, the U.S. reversing a 60-year fuel importing trend, local prices-at-the-pump under $2 a gallon, fracking & horizontal drilling technologies and now oil exporting are making our country the new Saudi Arabia…watch out OPEC. All of this furthers the “oil momentum” the U.S. has been experiencing.
But is low oil a good thing for the economy?
LIKE GETTING A HUGE TAX BREAK
Of course, if you live in a “fracking state” or are working for an oil producer, the drop is not positive. Even with this weakness ExxonMobile (XOM, $79.16) should make $20 billion in profits. Not too shabby.
According to Stephen Stanley, every penny that gas drops puts about $1 billion into consumers’ pockets. The Energy Information Administration says, in January 2014, the national pump price was about $3.40/gallon. In November of 2015, the latest month data is available, the price dropped to $2.26.
That’s like the U.S. consumer getting a $114 billion tax refund! A tenth of a trillion to be saved and spent, priming our economy further. And it didn’t cost the government a thing.
Also, most companies will benefit from this renaissance. If you’re a company that has a fleet of cars then that expense just dropped. If you get anything delivered then that cost could drop. Even if you’re an oil refiner, then your main input cost just got cheaper. And on and on. Low oil can be beneficial to most companies and consumers.
PLAYING THE TRENDS
What do you invest in to take advantage of these market moves?
For low oil you could invest in airlines, consumer staples and consumer discretionary companies. All three of these sectors have an ETF (exchange-traded fund).
The only airline ETF is U.S. Global Jets ETF (JETS, $25.63). You can use Consumer Staples SPDR (XLP, $51.24) and Consumer Discretionary SPDR (XLY, $79.59) for those areas. Both of the SPDRs are the largest fund in their respective sectors but there are many more to choose from.
As always, use these ideas for your starting point to research and learn more, not as specific recommendations. I have other ideas that are producing anywhere from 4-9% in annual income. Call me at (719) 545-6442 or email me at RonPhillipsAdvisor@gmail.com to get more info on these. Happy New Year!