Oil prices have been dropping drastically and for the first time since May 2009, US crude oil is down to below $48 a barrel.
There’s a variety of economic reasons for the drastic drop we are currently experiencing: weak demand for oil, slowed economic growth, surging US production are just but a few of the reasons.
One of the major reasons though, was the unexpected decision of OPEC members not to cut oil production to reduce supply and keep prices high.
While many analysts have written about the various theories and strategies attempting to explain OPEC’s decision, we are here to explain what this means for YOU on the end of the consumer!
1) Dropping Petrol Prices
One of the most obvious things you would notice is the drop in petrol prices. While the price of petrol did not drop as drastically as we might have hoped, this sustained period of low oil prices would surely start to trickle down into savings at our pump stations.
Bottom line: It’s a great time to be pumping full tanks!
2) Great Time To Buy Stocks Of Oil Companies
If you’re looking for something to fall as quickly as the oil prices, you don’t have to look any further than the stock market. Prices of oil and drilling companies and been falling almost as fast as the price of oil itself. If any of you are into Warren Buffett’s brand of value investing, this might be a great time to pick up stocks on a huge discount!
Bottom line: Oil stocks on huge discount! Should you be buying them?
3) Cheaper Plane Tickets
Some airlines such as Qatar, Cathay Pacific and Virgin Atlantic are reportedly dropping their fuel surcharge in view of the falling oil prices. However not all airlines are following suit as most airlines usually practice fuel hedging, thus they may not benefit from the immediate drop in fuel prices.
If you pick the right airlines, you might find that it’s a great time to be buying plane tickets!
Bottom line: Time to travel, anybody?
4) Lower Transport Fees & Electricity Tariffs
Oil actually makes up such a big part of our lives even if you’re not driving. Recently, our Minister for Trade and Industry mentioned that the drop in oil prices will translate to lower electricity tariffs. Even the Transport Minister mentioned about the possibility of reducing fares during the next fare review exercise.
Bottom line: Cost savings is always welcomed!
5) Lower Inflation
Given that spiking oil prices was one of the main culprits of inflation in the past few years, this recent drop in oil prices might just reduce the pace of inflation we are experiencing. However, we would just have to wait and see what surprises the next OPEC meeting might bring for us.
Bottom line: Low oil prices are (generally) good for the economy.
Image Credits: mirror.co.uk