Over the last 18 months, the price of WTI crude oil has dropped from over $100 a barrel to less than $30 a barrel. Although this price drop hurts the businesses involved in the petroleum industry, there are several businesses that can benefit from the huge reduction in the price of oil.
Petroleum is a major component of plastic, and plastic is used in numerous products, such diverse items as dishwashers, microwave ovens, computers, DVDs, pipes, toys, and automobiles. So the price drop of petroleum reduces the cost of materials for plastic manufacturers, which can increase their earnings and allows them to pass on cost savings to the product manufacturers. Then the end-product manufacturers benefit from the lower cost of plastic for their products.
Of course, airlines benefit from lower fuel prices (assuming they didn't hedge their fuel purchases too soon). Jet fuel is produced from oil, so when the price of oil drops, the price of jet fuel drops. Since fuel is the biggest expense for airlines, other than labor, the savings from fuel costs can be significant and provides greater earnings for the airlines.
Let's get back to hedging. In simple terms, airlines can lock in the price of future purchases of fuel. So if an airline hedges, and the price of fuel goes up, the airline gets to buy its fuel at that lower price that it locked in. But if the price of fuel drops after hedging, then too bad for the airline.
Unfortunately, many of the major airlines did hedge at much higher prices. Management of these airlines assumed that when oil was around $40 or $50 a barrel, it was time to hedge. Alas, their bottom fishing was wrong.
However, there are a couple airlines that made some right decisions.
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