How To Profit from Falling Oil Prices

How To Profit from Falling Oil Prices

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According to, oil prices are the lowest they’ve been since 2009 due to “stagnant global demand and increased supply.” Fortunately, the declined prices are not a result of an economic crisis, but suggested to be because of “growth in Europe, Japan, and China, set against rising production in Saudi Arabia, Russia, Libya, and the U.S.” Prices have drastically slid down, even within this year, from $105 a barrel in the summer to about $60 more recently.

Analysts at Goldman Sachs foresee output and use will grow in 2015, “but supply will outpace demand.” This will push oil down even further, but Time reveals a three-part action plan so that you can “protect your portfolio and profit from the gut.”

  1. Ease off emerging markets: Matthew Berler, CEO of Investment from Osterweis, says Russia and Iran need oil to be $100 or more a barrel to avoid budget deficits, as reported on Time. Tom Forester, head of Forest Capital Management, says that Saudi Arabia has been “playing hardball” by refusing to minimize production, which could lead to other parts of emerging markets taking a hit. Time suggests that this is a good reason to cut emerging markets to 5% of your portfolio.
  2. Bet on shipping: Economist Edward Yardeni reports, “the transportation industry is getting a big windfall,” as gas is expected to stay .30 a gallon below 2014 highs. Part two of the action plan advises readers to “lean toward cheaper truckers and airlines, which benefit from sinking prices and rising spending.” Two-thirds of SPDR S&P Transportation ETF is in those industries.
  3. Save on a gas sipper: “When gas prices go down, you see an immediate impact on vehicle choice,” says John Krafcik, president of pricing site TrueCar, according to Time. Among discounted super-fuel-efficient cars, like Ford’s Focus Electric for $6,000, Krafcik expects to see more deals on gas-engine midsize and compact sedans. While the SUV is back in vehicular trends, going with a smaller, more efficient ride may prove to pay off in the end.