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Remember Lower Oil Is Positive

The market’s response to the lower price of energy has turned negative. It has started to look at the glass as being half empty, but in reality the glass is half full. Granted, the companies in the business of producing and distributing oil are heading into more difficult times, but the consumers of oil will benefit. Where oil is a raw material for producing other goods, the price drop leads to higher profits. (Think chemicals, plastics, lubricants…) Where oil is consumed in order to render services, there is also a higher profit effect. (Think airlines, truckers, transportation in general, utilities). For consumers, the oil price drop increases disposable income. (Think retail, motels, amusement parks, restaurants.) Lastly, since oil is priced in dollars, we are experiencing more of a drop than producers in other countries, giving U.S. companies a competitive advantage. It seems that for every negative there are two positives. Half empty…really?

About the Author

Harlan J. Cadinha
Founder, Chairman and Chief Strategist




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