Here's What Falling Oil Prices Mean For 12 Stock Market Sectors

Akin OyedeleNov 18, 2014, 00:51 IST

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 $10 per bbl move in crude oil or $0.25/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 $10 drop in the price of Brent crude per barrel would increase 2015 earnings per share (EPS) by about $2 to $124 per share, Kostin wrote. This is based on a projection that Brent will average $84 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.

Brent crude oil has fallen 33% per barrel since June, while West Texas Intermediate crude has declined by 30% per barrel. Goldman sees the price of oil falling even further in the medium-term because of increased production by non-OPEC countries and the American shale boom.

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Here's What Falling Oil Prices Mean For 12 Stock Market Sectors