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Pain and Gain in the Oil Price Freefall


Cheap oil might sound like great news to some, a disaster to others, but whoever is happy or devastated should know one thing; it is unlikely to end soon. CNBC’s Dennis Gartman thinks oil prices have not bottomed yet. There was some hope that the OPEC meeting last Thursday would have given some solace to the more troubled member states, like Venezuela, which has seen its economy crushed by declining oil futures. Still, the Saudis and others refused to budge from production targets, even as demand for oil lessens with the slowing global economy, and the rate of production continues to drive down prices.

For consumers who recall times when they have paid dearly at the pump, even had second thoughts about a night out because of what it would cost to even get to the restaurant or club, low cost oil is a boon. Delivery companies like FedEx and UPS are also reaping the fruits of low commodity costs, as well as chemical companies for whom oil is a major raw material. Strong earnings from companies that are improving their bottom lines because of cheap oil are driving up stocks.

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The ones who get hurt are countries like Venezuela that depend heavily on oil production. U.S. oil companies are getting slammed, but the smaller ones suffer more of a blow than the majors. It is likely that, if oil falls further, and experts like Dennis Gartman of CNBC thinks it might, there may be more consolidation in the oil industry or some smaller oil producers will likely hit a wall.







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