The cost of oil affects consumers and businesses in a variety of ways.
“Lower oil prices typically affect companies through either (or both) lower
input costs or increased consumer spending,” Goldman Sachs’ David Kostin said. “We estimate that a $US10 per bbl move in crude oil or $US0.25/gallon move in gasoline prices impact discretionary cash flow by 30-40 bps, similar to about 1/3 point shift in the unemployment rate or 25 bps move in disposable personal income.”
So for consumers, plunging oil prices are a good thing.
For S&P 500 companies, a $US10 drop in the price of Brent crude per barrel would increase 2015 earnings per share (EPS) by about $US2 to $US124 per share, Kostin wrote. This is based on a projection that Brent will average $US84 per barrel next year.
Goldman’s consumer equity research analysts compiled this table that shows the effect of lower oil on earnings in various retail sectors and companies within them that could benefit the most.