Companies are hoarding their oil savings

The oil crash has made the cost of doing business cheaper for some companies.

However, it doesn’t look like they are passing on these savings to consumers.

In a blog post on Monday, the Atlanta Fed notes that in 2013 it asked companies in the region how they would respond to different changes in commodity prices.

Here’s what they said:

“At the time, we were struck by how differently firms tend to react to commodity price decreases versus increases. When materials costs jumped, respondents said they were likely to pass them on to their customers in the form of price increases. However, when raw materials prices fell, the modal response was to increase profit margins.

The charts below illustrate how this dynamic has played out during the current oil crash.

The firms’ unit costs of production have plummeted:

But profit margins have headed in the opposite direction since June when oil prices started tanking:

Read the full post at the Atlanta Fed’s blog here ยป

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